TCS Q1 Results: Attrition rate rises to 13.8% for the last 12 months

Tata Consultancy Services (TCS) reported a rise in attrition to 13.8% in Q1 FY26. Read about the company’s performance, hiring outlook, and investor reaction

Jul 10, 2025 - 20:02
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TCS Q1 Results: Attrition rate rises to 13.8% for the last 12 months
Tata Consultancy Services (TCS) reported a rise in attrition to 13.8% in Q1 FY26. Read about the company’s performance, hiring outlook, and investor reaction

Mumbai, July 10, 2025 — Tata Consultancy Services (TCS), India’s largest IT services company, announced its financial results for the first quarter of FY26 on Wednesday. While the company posted steady revenue growth and healthy margins, one key concern emerged—its attrition rate, which climbed to 13.8% over the last twelve months, signaling persisting workforce challenges.


Key Highlights from TCS Q1 FY26 Results

  • Revenue: ₹63,660 crore, up 5.4% YoY

  • Net Profit: ₹12,180 crore, up 8.2% YoY

  • Operating Margin: 24.9%, marginally improved

  • Attrition Rate: 13.8% on an LTM (Last Twelve Months) basis

  • Headcount: 603,305 employees as of June 30, 2025

  • New Deals Signed: $9.8 billion in Q1


Attrition Sees Uptick Despite Cooling Job Market

TCS reported an attrition rate of 13.8%, up from 13.3% reported in Q4 FY25. This comes as a mild surprise to industry watchers, as many believed the IT hiring frenzy had subsided and workforce churn would stabilize. The rise in attrition, although not alarming, suggests that employee retention remains a challenge—especially in a post-pandemic hybrid work environment.

Milind Lakkad, Chief HR Officer of TCS, acknowledged the trend during the earnings call:

“While the attrition rate has edged up slightly, it is well below the highs of FY24. Our efforts to enhance employee engagement and internal career mobility are ongoing. The rise is largely a reflection of industry realignments.”


Hiring Trends: Strategic But Conservative

TCS added 5,112 net employees in Q1, marking a cautious return to hiring after a few muted quarters. The company is focusing on strategic skill-based recruitment, especially in AI, cloud, and cybersecurity. The headcount now stands at over 603,000, reinforcing TCS’s position as one of the world’s largest IT employers.

Industry experts view this attrition in context. Nandita Iyer, Senior IT Sector Analyst at Kotak Securities, noted:

“TCS’s attrition figure is still among the lowest in the top-tier IT space. However, any uptick amid improving margins needs to be watched closely. It could reflect increased competition for niche talent.”


Financial Performance Remains Robust

Despite the attrition headwind, TCS delivered strong financial performance:

  • Net profit rose 8.2% YoY to ₹12,180 crore.

  • Revenue grew 5.4% YoY to ₹63,660 crore.

  • EBIT margin expanded slightly by 20 bps to 24.9%.

Growth was driven by cloud transformation, AI-led services, and improved demand from the BFSI (Banking, Financial Services & Insurance) and retail sectors in North America and Europe. However, the company did indicate that macroeconomic uncertainties continue to weigh on discretionary tech spending.


Market Reaction and Analyst View

Following the results announcement, TCS stock saw marginal movement in after-hours trading, reflecting a mixed investor response. While revenue and margin improvements were seen positively, the uptick in attrition and cautious hiring kept market sentiment in check.

Ravi Menon, IT analyst at Motilal Oswal, commented:

“The financials are in line with expectations, but attrition creeping up indicates that talent management is still a pain point. TCS’s long-term digital strategy remains sound, and we expect growth acceleration in the second half of FY26.”


Employee Focus Remains a Priority

TCS reiterated its commitment to employee well-being and talent development. Initiatives include:

  • Re-skilling programs in GenAI, data science, and blockchain

  • Enhanced career mobility platforms internally

  • Hybrid workplace models to retain experienced talent

The company continues to invest in campus hiring and plans to onboard over 40,000 freshers in FY26. However, onboarding schedules remain flexible based on project ramp-ups.


Investor Outlook: Cautiously Optimistic

For investors, the rise in attrition might be a short-term concern, but TCS’s fundamentals remain strong. With a robust deal pipeline of $9.8 billion this quarter and continued demand for cloud and AI services, analysts believe the company is well-positioned for growth.

That said, talent availability and wage cost inflation will continue to influence margin trajectories. If attrition remains elevated or worsens in upcoming quarters, it may pressure operational efficiencies.


TCS’s Q1 performance underscores the company’s resilience and continued dominance in the global IT landscape. While attrition has ticked upward, the company’s proactive employee strategies and strong order book provide a solid foundation going into the rest of FY26.

As the broader IT industry continues to recalibrate in the post-pandemic world, talent retention and upskilling will likely become the defining factors for sustainable success.

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