Mumbai, July 28, 2025 — India’s information technology (IT) sector is navigating a challenging start to FY26, with muted quarterly growth and shrinking workforce numbers signaling a major transformation in industry priorities.

Q1 FY26: Sluggish Growth Across Top IT Firms

India’s major IT players — including TCS, Infosys, Wipro, HCLTech, and Tech Mahindra — posted single-digit revenue growth in Q1 FY26, largely due to reduced client budgets, delayed project ramp-ups, and economic uncertainty in key export markets such as the US and Europe. The weak performance is attributed to ongoing global macroeconomic headwinds, cautious client spending, and a growing preference for outcome-based, niche technology solutions.

The Banking, Financial Services, and Insurance (BFSI) sector — a key vertical for Indian IT — also saw lower tech spending, contributing to subdued revenue. Analysts cited elongated sales cycles, project deferrals, and a slowdown in discretionary tech investments among global clients.

According to analyst reports, traditional bulk outsourcing deals have slowed, while companies are focusing on high-skill services in AI, cloud computing, and cybersecurity to drive future growth.

Net Hiring Hits a Multi-Year Low

The sector added just 4,787 employees across the top five IT firms in Q1 FY26 — a dramatic drop from previous quarters where hiring numbers regularly surpassed 30,000–40,000. This decline signals a decisive shift in hiring strategy from volume recruitment to targeted talent acquisition.

Attrition rates have also stabilized, suggesting a tightening labor market where companies are cautious about onboarding amid an uncertain demand environment.

TCS Confirms 12,000 Layoffs

Further intensifying the sector’s transformation, Tata Consultancy Services (TCS) announced plans to lay off approximately 12,000 employees, primarily at mid- and senior levels. The move is part of TCS’s broader cost-optimization and digital restructuring strategy, focused on streamlining operations and investing in next-gen technologies.

The layoffs will help realign talent toward high-demand areas such as generative AI, automation, and platform engineering. Following the announcement, TCS shares fell by 1.7% in early trading on Monday, reflecting market concern over reduced margins and workforce realignment.

Expert Insight

"This is not just a cyclical slowdown — it’s a structural transition. The IT industry is evolving toward leaner, more tech-specialized teams to stay globally competitive," said Priya Menon, Senior Analyst at EmTech Advisors.

Industry Outlook

While near-term growth appears constrained, analysts say the long-term outlook remains positive for companies that adapt swiftly to emerging technologies and client demands. Strategic upskilling and automation integration will be key themes in the coming quarters.

Smaller firms may face more pressure than tier-1 players, given limited bench strength and tighter margins. However, strong balance sheets and continued global demand for digital services could offer relief over the medium term.