TCS stock hits 33-month low; Jefferies, YES Securities' take on what's next

TCS shares extended their decline for the fourth consecutive session, slipping 4 per cent after it announced plans to lay off roughly 2 per cent of its global workforce

Shares of Tata Consultancy Services (TCS) slipped 1 per cent to ₹3,058.10 on the BSE during Tuesday’s intra-day trade, hitting their lowest level in 33 months.

 

The stock of the information technology (IT) major is trading lower for the fourth straight day, falling 4 per cent after the company said it would lay off about 2 per cent or 12,260 employees of its global workforce.

 

The stock has fallen below its previous low of ₹3,060.25, touched on April 7, 2025 and is trading at its lowest level since October 2022. Thus far in the calendar year 2025 (CY25), the stock has underperformed the market by falling 25 per cent, as compared to a 3 per cent rise in the BSE Sensex.  Track LIVE Stock Market Updates Here

A 'wake-up call' for IT sector

As per media reports, TCS’s decision to lay off ~12,000 mid-to-senior level employees, freeze senior hiring, and pause global salary hikes marks a major shift in the Indian IT landscape, driven by AI-led disruption, cost pressures, and weak demand.

 

The move, aimed at reviving margins stuck below the 26-28 per cent band (Q1FY26 Ebit at 24.5 per cent) for 5 quarters and correcting over-hiring from the FY21-22 tech boom, signals a broader sectoral transformation, away from headcount-based models to outcome- and productivity-driven approaches.

 

Industry veterans like CP Gurnani and Ganesh Natarajan have called it a “wake-up call” to rethink delivery models, as clients demand faster turnaround, pricing based on output, and AI-led efficiencies.

 

The IT Ministry is seeking clarity on the move, while unions allege illegality. Analysts view this as a warning signal for the broader IT sector, with others like Wipro and Tech Mahindra possibly following suit, ICICI Securities said in a note. 

Analysts take on TCS workforce cuts

Jefferies said TCS's decision to cut 2 per cent of its workforce could lead to near-term execution challenges and may drive higher attrition in the longer run. The move also signals a weak demand environment for the broader IT sector.

 

The brokerage noted that the most recent deal wins are driven by cost-optimisation efforts and AI-led productivity gains. In this context, IT firms that fail to capture market share may be compelled to resort to workforce reductions.

 

Analysts at YES Securities expect TCS’s FY26 to remain muted, but FY27 should see a growth rebound. With valuations typically rerating ahead of recoveries, the brokerage firm in the Q1 result update said it expects a reversion to the mean in the multiples. 

 

Among the peer group of top-10 IT firms worldwide, TCS (International business) has lost market share from a range of ~18-19 per cent during FY14-22 to 17.6 per cent in FY25, most acutely in the last two years. However, strong domestic business growth (BSNL deal) countered the loss in international markets. Management has maintained its stance that international business is doing better in FY26 than FY25 in its 1QFY26 concall. 

The brokerage also noted that large-cap Indian IT firms have been ceding ground in the domestic market to faster-growing mid-cap companies, which have benefited from multiple tailwinds.