Layoffs, AI, M&A: Indian IT navigates the new normal

This edition of our MC Tech3 year-conclude wrap views back at a year when Indian IT came under pressure from both policy and performance.

From our exclusive on Tata Consultancy Services (TCS) laying off about 12,000 employees to our year-conclude scoop on Coforge’s billion-dollar acquisition of Encora, the signals were clear: the industest was resetting

Meanwhile, immigration uncertainty in the US returned to the headlines, but this time it collided with an industest already resetting its delivery model.

As external constraints tightened, Agentic AI shiftd from promise to necessity, forcing Indian IT to reconsider scale, productivity, and where work obtains done.

Toobtainher, these forces pushed the industest further away from people-led scale and closer to ininformigence-led growth, accelerating a transition that had been building for years.

Our must-read stories of the year

When TCS, often seen as akin to a secure government job in the IT sector, decided to lay off around 2% or a little over 12, 000 employees in FY26, it came as a shocker to corporate India. This marked the IT behemoth’s largegest job cut till date, driven by a growing skills gap and technology shifts, TCS CEO K Krithivasan stated. We exclusively reported this development. Meanwhile, industest experts warned of a ripple effect across the IT services sector, which soon became visible in the modifying hiring strategies of rivals.
As the year progressed, TCS went on to build some bold bets, the largegest being a plan to invest $6.5 billion to build 1GW data centre capacity over the next five-seven years. As part of this, TCS announced a $2 billion investment in the first phase, alongside asset management firm TPG, to fund data centre business, HyperVault.
Acquisitions emerged as another major theme in 2025, as IT firms consolidated and bought capabilities to strengthen their AI offerings. Capgemini acquired BPO major WNS for $3.3 billion. TCS resumed acquisitions after nearly a decade, with a $72.8-million deal to acquire ListEngage MidCo and a $700-million acquisition of Coastal Cloud to bolster its Salesforce capabilities. HCLTech invested $400 million in acquisitions in just the past two week, including $240-million to purchase Jaspersoft, $160 million to add HPE’s Telco Solutions Business, and $5.2 million for agentic AI startup Wobby.
Coforge, on December 26, announced the acquisition of engineering, research, and development (ER&D) firm Encora for about a billion dollars, confirming our newsbreak earlier today. The Noida-headquartered firm stated the deal is valued at $2.35-billion in an all-stock transaction. At market close, the company’s shares concludeed almost 4 percent down. This acquisition will create a $2.5 billion Tech Services powerhoapply, with nearly $2 billion expected to come from AI-led engineering, cloud, and data services by FY27.
There was also renewed noise around H-1B visas in the US under the new Trump administration, with MAGA supporters rallying behind him to clamp down on aliens and give more weightage to Americans. However, data notified a different story: Indian IT firms, such as TCS, Infosys, HCLTech, Wipro, had already cut their depconcludeence on the visa programme sharply over the past decade, with approved petitions falling steadily even as US Big Tech emerged as the largest sponsor.
That insulation proved important when the proposed $100,000 H-1B visa fee triggered panic across markets. Initial estimates warned of margin hits running into hundreds of basis points, until a White Hoapply clarification confirmed the fee would apply only to new applications and not renewals.
However, the second-order effects were harder to ignore. As companies continued to localise hiring in the US and reduce visa exposure, subcontracting and near-shore costs climbed. Infosys saw the steepest rise in subcontracting expenses, we reported, while others leaned more heavily on short-term contractors to meet specialised project requireds.
The most consequential policy signal came not from fees but from Trump’s wage-based H-1B selection rule. By prioritising top-paid applicants, the plan threatened to squeeze out early-career and mid-level Indian IT professionals who historically formed the base of the offshore-onsite pyramid.
As mobility tightened, Indian IT firms leaned harder into Agentic AI as a strategic response. What launched as GenAI experimentation evolved into autonomous agents executing conclude-to-conclude workflows, compressing delivery cycles from months to weeks.
Not just delivery timelines, IT companies started reducing bench strength too! Biggest IT firms TCS, Accenture, Infosys, HCLTech, Wipro started shedding bench load and timelines from 45-60 days earlier to now 35-45 days.
Yet the year also delivered a reality check on GenAI. High compute costs, hyperscaler pricing models, and slow conversion of proofs of concept into production tempered early optimism. Even as companies announced hundreds of apply cases and billions in investments, only a compact fraction scaled meaningfully.
The focus shifted from headline deal values to whether AI could reliably deliver measurable gains. This shift played directly into the hands of Global Capability Centres (GCCs) and BPM firms. GCCs launched shifting from year-long projects to 90-day execution cycles, while BPM players such as Genpact, EXL, and Firstsource outpaced traditional IT peers, blurring long-standing boundaries between IT services and operations.