TCS Q3 results: IT firm says 'we expect employee terminations to continue in Q4, with no specific target'

TCS Q3 results: IT firm says 'we expect employee terminations to continue in Q4, with no specific target'

• TCS expects employee terminations to continue next quarter with no set target
• AI services generate $1.8 billion annually, making up 5.8 percent of TCS revenue
• TCS reported a 13.91 percent drop in Q3 profit due to new labour code provisions

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Tata Consultancy Services' top executive on January 12 said the IT firm expects to continue with employee terminations in the next quarter as well but with no specific target.

Chief Human Resources Officer Sudeep Kunnumal told analysts that there were 1,800 exits on account of a restructuring exercise announced in August.

Kunnumal said at a post-Q3 results analyst meet, "Released 1,800 employees with due care and compliance in this quarter. Expect to continue into the next quarter as well, but we are not going after a number. It is purely a process and we only release employees if there is a genuine reason."

TCS had announced axing of about 12,000 people earlier this fiscal year as part of its restructuring exercise. It reported a reduction of 19,755 in the overall staff count in the September quarter, but hinted that only 6,000 of these were involuntary actions because of the restructuring exercise.

Chief Financial Officer Samir Seksaria said margins were positively impacted by productivity gains and currency movements, while the wage hike impact and brand building proved to be a headwind.

However, changes in the labour codes will continue to have a 0.10-0.15% impact on margins going ahead, he said.

During the quarter under review, it decided to set aside over Rs 2,100 crore towards the labour code provisions, he said, adding that this included Rs 1,800 crore on gratuity and Rs 300 crore on leave enchashments.

Artificial intelligence-led tech spending boosted growth for the Tata Group firm in a traditionally weak quarter, with AI services generating $1.8 billion annually and making up about 5.8% of total revenue.

"Based on the client conversations, strong deal momentum and the leadership we are gaining in AI, we are confident of a good calendar year 2026," said K Krithivasan, chief executive during a post-earnings analyst call.

Country's largest IT services exporter on Monday reported a 13.91% drop in December quarter profit at Rs 10,657 crore, majorly on a one-time impact of new labour codes.

After trimming nearly 20,000 employees in the September quarter, the country’s largest private-sector employer further reduced its headcount by 11,150 in the three months ended December 2025, taking its total employee strength to 5,82,163.

The sequential drop extends the workforce contraction seen in the previous quarter, showing a broader reset underway at the Mumbai-headquartered IT major as it trims roles and optimises its cost structure amid shifting demand and rapid technology changes.

The headcount reduction came in a quarter when TCS also booked large exceptional charges linked to restructuring and statutory changes under India’s new labour codes, pointing to the depth of the organisational realignment.

Nevertheless, restructuring expenses fell sharply in Q3, declining by over 77 percent to Rs 253 crore, indicating a tapering of one-time costs linked to the company’s ongoing workforce realignment.