Top Indian IT firms see net loss of nearly 3,000 employees in Q3 FY26

The Indian IT services sector, a critical engine of the nation’s economy, has encountered a transformative phase as of the third quarter of fiscal year 2026 (Q3FY26).

This period, ending 31 December 2025, has been defined by a fundamental shift in the relationship between revenue growth and human capital requirements. Historically, the sector followed a linear trajectory where increased contract volumes necessitated a proportional expansion of the workforce. However, the latest earnings releases from the industry’s Tier-1 and mid-tier players, including TCS, Infosys, Wipro, HCLTech, and Tech mahindra, reveal a structural decoupling of these two metrics.

The industry is navigating a “Barbell Model” of talent demand, where high-level architectural and AI expertise is sought aggressively, and campus-level fresher intake is maintained for long-term pyramid health, while the traditional “middle” of the workforce faces intense rationalisation due to automation and shifting client priorities.

This transformation is occurring against a backdrop of complex macroeconomic headwinds in the US and Europe, alongside the implementation of the significant domestic regulatory reforms in decades; the New Labour Codes of 2025.

The great contraction vs. Selection expansion

The most striking revelation of the Q3 FY26 earnings season is the aggregate net reduction in headcount across the major software exporters. While individual company strategies have diverged significantly, the collective movement indicates a sector that is becoming leaner, more automated, and highly selective in its recruitment practices.

The aggregate data reveals a net contraction of 2,977 employees across these six major entities. This figure, however, masks a more aggressive rationalisation at certain firms. TCS and Tech Mahindra together shed over 14,000 employees, whereas Infosys and Wipro added nearly 11,500. This divergence suggests that while the industry is under pressure, companies are at different stages of their workforce restructuring cycles.

Macroeconomic catalysts and vertical realities

The contraction in headcount is primarily driven by a "spending plateau" in key global markets. Global enterprises, particularly in the United States and Europe, have curtailed discretionary technology spending in response to high interest rates, persistent inflation, and geopolitical uncertainties. These regions account for roughly 70% of India's IT revenue, and any shift in their procurement cycles has an immediate ripple effect on domestic staffing.

Future outlook

The Indian IT sector's workforce dynamics in Q3 FY26 signal the end of the labor-intensive growth era. The industry is transitioning toward a "leaner, smarter" model where productivity per employee, augmented by AI, is the primary driver of value.

The total net headcount reduction of 2,977 employees across the top firms is a harbinger of a structural shift. While companies like Wipro and Infosys are continuing to honor campus commitments to refresh the talent pyramid, the massive restructuring at TCS and Tech Mahindra suggests that middle-management and roles linked to traditional technologies are under permanent pressure.