TCS shares fall nearly 2% as company announces workforce reduction amid demand and skills realignment

Business Upturn

28-07-2025

Shares of Tata Consultancy Services Ltd (TCS) slipped nearly 2% to ₹3,094.30 on Monday, following the company's announcement of a planned 2% reduction in its global workforce over the course of the year. The stock was down from its previous close of ₹3,135.80, as investors digested the implications of the move, particularly in the context of slowing demand and evolving business priorities.
The company stated that the layoffs would primarily impact employees in the middle and senior management levels and emphasized that the decision was driven not by cost pressures or AI disruption, but by a misalignment of current skills with deployment feasibility. CEO K Krithivasan clarified that TCS continues to invest in acquiring and training high-quality talent and that the workforce reshaping is part of its transition toward becoming a 'future-ready organisation.'
The announcement comes amid a broader trend of declining headcount across the Indian IT sector following the post-pandemic hiring surge. TCS has already seen a reduction of 2,249 employees, while rivals Infosys and Wipro have reported even steeper cuts of over 12,000 and 25,000 respectively.
Brokerages were cautious in their reaction. Citi reiterated its 'sell' rating on TCS with a target price of ₹3,135, suggesting that the workforce cut could be attributed to multiple factors such as margin pressures, skill gaps, productivity challenges, and softening demand. It flagged concerns over near-term margin and cash flow performance.
Jefferies warned that the downsizing could lead to execution challenges in the short term and potentially drive higher attrition over time. The brokerage highlighted that with deal wins increasingly linked to cost optimisation and AI-driven productivity, companies failing to gain market share may be forced to rationalise headcount. Jefferies remains selective in its IT coverage, preferring names like Infosys, HCLTech, Coforge, and Mphasis.
Despite the cautious commentary, a majority of analysts continue to have a positive long-term view on TCS. Of the 51 analysts tracking the stock, 32 maintain a 'buy' rating, 15 recommend 'hold', and only four advise 'sell.'
The market reaction reflects immediate concerns about the broader IT sector's growth trajectory, even as companies like TCS try to future-proof their talent and optimise their operations in a shifting technological and economic landscape.
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