Tata Consultancy Services (TCS) is cutting 2% of its workforce, affecting over 12,000 employees, primarily in middle and senior management roles. The move, part of the company’s “Project Fluidity” initiative, aims to boost agility and prepare for an AI-driven future. TCS CEO K. Krithivasan called it a tough but necessary decision to address skill mismatches and ineffective redeployment, not cost-cutting or AI automation. The company promises severance, counseling, and outplacement support to ensure smooth transitions without disrupting service delivery.

Brokerages Investec and Citi agree the layoffs aren’t AI-driven but reflect strategic realignment. Investec downplays the cuts, noting that 2% of TCS’s 613,000-strong workforce is typical for industry involuntary attrition (1–2%). They attribute the layoffs to inefficiencies in managerial structures built on tenure. Investec predicts a short-term margin hit of 60 basis points due to severance costs but expects recovery, maintaining a 'Buy' rating due to strong deal wins and limited downside risk.

Citi, however, is less optimistic, sticking with a 'Sell' rating. They highlight industry-wide challenges like skill mismatches, margin pressures, and sluggish growth amid macro uncertainty. Citi sees the layoffs as a response to failed redeployment rather than a headcount reduction. They also express concerns about market fragmentation and rising competition, favoring Infosys over TCS for near-term sector performance.

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As TCS navigates this restructuring, the industry watches closely to see if “Project Fluidity” will deliver the agility needed for an AI-transformed future or signal deeper challenges ahead.

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