Layoffs Due to AI: Indian IT Firms Cut US Onsite Jobs As Adoption of Artificial Intelligence Accelerates and Large Deals Slow

Indian IT services and business process outsourcing firms are significantly increasing job cuts in the United States, with early 2026 data suggesting a sharp rise in onsite layoffs compared to previous years. According to regulatory filings, companies including Infosys, HCL Technologies, and Hinduja Global Services have filed Worker Adjustment and Retraining Notification (WARN) notices in several US states, including Florida, Texas, and Pennsylvania. Analysts indicate that the surge in reductions is primarily driven by the deepening integration of artificial intelligence into client workflows and a general slowdown in high-value, billion-dollar transformation deals.

The current wave of layoffs marks a departure from previous cycles, where workers were typically redeployed to new projects following the completion of a contract. In the first three months of 2026 alone, Indian heritage firms may have already surpassed the total number of US job cuts recorded throughout all of 2025. Experts suggest that as AI becomes more pervasive, the demand for traditional onsite roles is diminishing, leaving firms with fewer opportunities to reassign staff who were originally "rebadged" from clients during large-scale outsourcing agreements.

Impact of AI on Large Scale "Rebadged" Contracts

A significant portion of the current workforce reduction is affecting employees associated with "mega-deals"—contracts exceeding USD 1.00 billion. Historically, these deals involved the service provider taking over the client's existing staff, a process known as rebadging. However, the risk inherent in this model has intensified as the macro-economic environment shifts. With AI now automating repetitive tasks and streamlining complex software development processes, the volume of human intervention required on these projects has dropped.

In previous years, IT giants could easily absorb excess onsite staff into emerging projects. Currently, however, the combination of rising interest rates and AI-driven efficiency has suppressed overall demand for onsite labor. While some filings, such as a recent notice from Infosys BPM involving 248 employees, represent a transfer of staff back to the client rather than a permanent layoff, the broader trend points toward a sustained reduction in headcount for roles that were once considered essential for onsite delivery.

Broader Tech Layoff Trends in 2026

The tightening of workforces by Indian IT firms is part of a larger, more aggressive contraction across the global technology sector. In the first quarter of 2026, more than 52,000 tech jobs were cut in the US alone, a 40% increase compared to the same period in 2025. Major multinational corporations have also contributed to the total; Oracle recently eliminated approximately 30,000 roles globally, including 10,000 positions based in India, while Amazon has continued to trim its corporate headcount by an estimated 16,000 roles this year.

This sector-wide shift is being characterised by many analysts as a "structural transition" rather than a temporary market correction. While earlier layoffs in 2023 and 2024 were often blamed on over-hiring during the pandemic, the 2026 reductions are increasingly attributed to the pursuit of "leaner" operational models. Companies are now redirecting capital away from general administrative and support roles toward AI infrastructure and specialised data science positions, creating a net gap in employment for traditional IT professionals.

Future Outlook and Workforce Realignment

As the industry pivots, the traditional labor-centric model of Indian IT is transitioning toward a "services-as-software" approach. This evolution suggests that the productivity gains from generative AI will continue to impact hiring patterns for both onsite and offshore teams. While companies like TCS have previously announced plans to become "AI-first," the immediate result has been a reduction in bench strength and a more cautious approach to onboarding new talent.

For onsite workers in the US, the path to re-employment has become statistically more difficult. Reports from Goldman Sachs suggest that tech workers displaced by AI currently take an average of one month longer to find new roles and often face an earnings reduction of more than 3% upon re-entering the workforce. As Indian IT firms continue to navigate this transition, the focus is expected to remain on outcome-centric models that prioritise automated efficiency over large-scale human deployment

(The above story first appeared on LatestLY on Apr 09, 2026 10:56 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).