LTTS expects headcount drop in third quarter as more work gets automated

AI-driven automation is helping LTTS decouple revenue growth from workforce expansion, with productivity gains expected to reduce headcount in Q3

 

Mid-tier IT services company, L&T Technology Services (LTTS), expects its headcount to drop in the third quarter, as artificial intelligence (AI) is helping it do more with less, effectively decoupling the linearity between revenue growth and headcount addition as more work gets automated.

 

LTTS, which focuses primarily on engineering research and development, is among the first companies to acknowledge this shift, even as human resources experts, headhunters, and analysts are trying to figure out the gains these firms are making by using AI and AI agents in their processes.

 

Any substantial gains made should inevitably make them go slow on hiring -- a scenario that analysts expect to happen in the near future.

 

“That is good because we’ve been able to leverage AI. We have improved our productivity and I believe that next quarter our headcount will also come down because AI is helping us gain productivity and improve utilisation,” Amit Chadha, chief executive officer and managing director of LTTS, told Business Standard in an interaction after the company’s second-quarter results.

 

LTTS’ headcount rose by just 52 sequentially in Q2 and stood at 23,678 as of September 30, nearly the same even a year ago, while its attrition remained constant at 14.8 per cent. 

 

IT companies, whose operating model resembles a pyramid, have long relied on adding employees at the base or junior level, creating an army of engineers ready to be deployed whenever the firm won new projects. However, generative AI (Gen AI) and agentic AI have posed questions about the viability of the model going ahead because agents have been writing codes and performing many technical jobs that engineers with few years of experience were expected to do.

 

“I do believe that the pyramid is changing, evolving, and that is allowing us to actually put in freshers, AI agents, and robots at the pyramid. It helps us in terms of delivery. So going ahead, the focus will not be too much on headcount addition,” added Chadha.

 

LTTS hired about 300 fresh engineering graduates in Q2 and will add similar numbers in the next two quarters. It has been conservative in increasing headcount over the past few years; adding 1,372 people in FY23, 738 in FY24, and just 446 people in FY25.

 

Chadha’s comments come even as sister company LTIMindtree said last week that staggered wage increases are becoming the new normal, with rewards tied to AI reskilling.

 

LTTS’ net profit increased 2.8 per cent in Q2 to ₹328.7 crore while revenue was up 15.8 per cent at ₹2.979.5 crore. It touched a record total contract value of $300 million during the period, driven by a big push from clients for sustainable solutions business.

 

While mobility business, which contributed 35.5 per cent to the topline, dropped 10 per cent, Chadha expects this to be the bottom and growth to return from the first quarter of next financial year.

 

Chadha said people are finally clear about where to spend, particularly on software-defined vehicles (SDV) for internal combustion engines (ICE). “We have sold our SDV platform to a couple of clients as well this quarter. So SDV on ICE will be something that’ll grow,” he said.