Whalesbook
IT Job Cuts Accelerate
India's IT sector is changing how it manages its workforce, moving away from just hiring many people to focusing on efficiency and preparing for the future. Major IT companies are dealing with slower global demand and changing their strategies to focus on in-demand digital and AI skills. This shift happens as the overall IT industry grows, mainly thanks to Global Capability Centers (GCCs) that are taking on more innovation and product development.
IT Job Cuts Accelerate
In fiscal year 2026, the top five IT firms – TCS, Infosys, Wipro, HCLTech, and Tech Mahindra – cut a total of 6,981 jobs. This reverses the 12,718 net hires made in FY25. TCS led these cuts, letting go of 23,460 employees, and Tech Mahindra reduced its staff by 1,108. Infosys, Wipro, and HCLTech hired modestly, suggesting they are more focused on managing their workforce efficiency and profit margins. These job changes happened as the IT sector faced a market downturn, with the Nifty IT index falling sharply and trading near multi-year lows in early 2026. For example, TCS shares dropped 22.84% over the past year, even with a strong performance in the March 2026 quarter. TCS's price-to-earnings (P/E) ratio was about 17.54 in April 2026, showing how the market is re-evaluating the company. Infosys stock traded near ₹1,155 with a P/E of about 16.7 on April 24, 2026.
Shift to AI Talent and Specialized Skills
The industry's focus has clearly moved from hiring large numbers to hiring specialized talent. Companies are prioritizing workers skilled in AI, cloud computing, data analytics, and cybersecurity. This is a change from the past, when more employees usually meant more revenue. The need for AI talent is increasing competition for experienced workers, prompting firms like TCS and Wipro to offer significant pay raises to top employees. Analysts predict AI could lower traditional IT services revenue by 2% to 3% annually over the next few years, making this talent shift necessary. Hiring new graduates has fallen about 80% from its FY22 peak, showing a shift from building up a large bench of employees to hiring only when needed.
GCCs Drive Broader Industry Growth
Even with job cuts in traditional IT services, the overall Indian IT industry grew its workforce, adding 1.4 lakh employees to reach 59 lakh by 2026, according to Nasscom. This growth is largely driven by Global Capability Centers (GCCs), which are expanding their operations in India for the third year in a row. These GCCs are evolving from support roles to become key innovation centers, leading product development, research, and digital transformation, especially in AI. Companies like JPMorgan Chase are building large GCC campuses in India, highlighting its importance as a global hub for advanced operations. This expansion contrasts with the careful hiring at traditional IT firms and shows a split in talent demand across the tech sector.
Company Valuations Vary Widely
Company valuations among the top IT firms show different views from the market. In April 2026, Wipro and Infosys had lower P/E ratios around 15.8 and 16.7, with TCS at about 17.54. HCLTech's P/E was around 19.61, and Tech Mahindra's was highest at about 27.72, indicating varied growth expectations and market risks. Analysts have mixed feelings, with 'Buy' ratings for TCS and Tech Mahindra, and 'Hold' ratings for Infosys and HCLTech. However, Wipro faces cautious analyst views, with some recommending 'Reduce' and Morgan Stanley downgrading it to 'underweight'. Fitch Ratings confirmed stable outlooks for TCS ('A'), HCLTech ('A-'), and Wipro ('A-') in March 2026, showing strong credit standing despite market challenges.
Challenges and Risks for IT Sector
The IT sector is facing major challenges that dampen optimism. Uncertain client demand and delayed decisions in the US and Europe are still affecting revenue growth. The predicted AI impact, expected to reduce traditional IT services revenue by 2% to 3% annually, presents a long-term risk. Additionally, HCLTech's stock dropped 9.7% on April 22, 2026, after a 3.3% revenue dip and cautious FY27 guidance, suggesting the sector could see more underperformance. Higher costs from US visa programs, like a proposed $100,000 H-1B fee, could cost large firms hundreds of millions. This could push them further toward offshore work and affect profit margins. Infosys's careful approach to salary increases and delays in hiring also raise questions about its ability to move quickly in a competitive job market.
Long-Term Prospects and AI Impact
Despite job cuts and AI impacts, the long-term future for India's IT sector still relies on digital transformation and AI. Gartner forecasts India's IT spending to reach over $176 billion in 2026, with IT services expected to grow by 11.1%. The industry is expected to create millions of new jobs, though different kinds, as AI adoption grows. However, AI's biggest disruption is expected between FY26 and FY28, with recovery starting around FY28 or FY29. Companies that can adapt to AI-first models, improve specialized skills, and benefit from GCC growth are best placed for future success.