Tech companies are back in the news for all the wrong reasons in 2026. They have announced more than 197,000 job cuts so far in 2026, according to TrueUp’s tracker as of 28th October. 

In the month of October alone, many companies including Netflix, eBay, Electronic Arts and Microsoft announced massive layoffs. Among these companies, Microsoft’s headline deserves a careful read. 

On 26th October it offered voluntary exit packages to about 60,000 eligible employees across the US, Canada, the UK and India. That is roughly a quarter of its global workforce. 

Since it is some kind of a voluntary exit, this does not count as a layoff or termination. Microsoft employees have until early December to decide if they want to accept the offer and those who accept will leave by the end of the year. This layoff by Microsoft follows 4,800 job cuts in July, about 2% of staff and a smaller voluntary retirement programme earlier this year. 

Oracle is another tech giant which is dominating the conversation. As of May 31, 2026, Oracle employs approximately 141,000 full-time workers, which is lower than 162,000 approximately a year earlier, according to the company’s annual filings. This number includes attrition and not just layoff. A second round of roughly 800 US job cuts is scheduled for November 13. Oracle’s annual filing says that the advent of AI is already helping the company to reduce its workforce and may keep doing so. 

How is AI a threat to Indian economy

Most global tech companies are US based and the Indian IT sector is heavily dependent on the US companies and that country’s economy. Any layoff at Microsoft, Oracle or Google is not just a headline but it also sends ripples across the corridors of Bengaluru, Hyderabad and Pune.  

The global layoff numbers are staggering but the pain is felt by many industries present in other countries too because they depend on these global tech companies. Many Indian IT companies have the US companies as their clients and generate a lot of US dollars as revenue.

Further, many US companies also have offices in India and employ a lot of Indians in many Indian cities as India has been the back office to the world and also they could hire quality workforce for low salaries. 

So, when US tech companies are laying off, it includes their offices in India also. If the US companies are moving towards AI to get things done and if they do not need Indian software engineers to complete their job, many software engineers in India will lose their job. This will have a chain reaction on the Indian economy because India’s economic growth coincided with the rise of the Indian IT sector.  The consumption story of India was supported by IT employees and even India’s real estate sector benefited from the IT sector. 

Understanding layoffs 

As an investor, be it investing in US stocks or Indian IT companies like TCS, Infosys etc., you need to understand these layoffs better from an Indian perspective. You can either see it as something negative or a beginning for a new wave of technological disruption. 

Already, India has become a hub for Global Capability Centres (GCCs) which means that we have become an innovation hub from being just an execution hub. Many AI-based startups from India are attracting foreign capital. 

If a company is cutting traditional support roles and increasing investments in AI research and development, then it is a positive sign. Similarly if a company in Bengaluru or Hyderabad is hiring AI architects and firing legacy roles QA testers, the company is evolving and adapting to the changing needs and not dying. 

Moreover, the world including India is witnessing the first wave of AI-driven work optimization. Many people are saying this AI wave will be bigger than the internet/dotcom era and AI is the fourth industrial revolution. 

In this AI era, the global economy is shifting capital and activity toward AI infrastructure like data centers, cloud computing, software, cybersecurity, etc. There may be productivity gains as well as new industries may get created. Investors should track these sunrise sectors and invest in companies present in these sectors.

But the transition creates friction and job losses due to mismatched skills, uneven access to AI tools as well as upskilling resources. Unemployment may increase due to automation of tasks, improved efficiency by machines and robots, and technology progress. However, history shows that net employment often recovers and expands with new companies, industries and renewed demand. 

Why foreign companies are cutting jobs

Companies do not make layoff decisions suddenly or do it for one reason. There are many reasons companies will decide to let go of their employees and the reasons behind them will determine if the news is positive or negative for shareholders. There are 4 main reasons that keep coming up whenever companies announce layoffs. 

• Artificial Intelligence (AI): In 2026, this has been the main reason. Every sector and industry is being hit by the wave of AI. Meta has downsized their workforce to pump in more money into AI infrastructure. Oracle, in its first quarter, spent roughly $28.5 billion on capital expenditure, which is higher than the $8.5 billion spent last year. Due to this, the company’s free cash flow turned negative. If companies have to spend more on chips and data centres to ramp up their AI capabilities, then the easiest thing to do is to cut their payroll.

• Cost control: Another reason is cost control. Uber said that they are cutting management layers and reducing micro-teams by nearly half. Visa and eBay also said that they are cutting their headcount to make their business more lean and efficient, rather than explicitly saying AI is the reason for the cost control. 

• Restructuring: Sydney-based software company, Atlassian, mentioned that they are terminating their employees to invest more into AI and enterprise sales. American technology conglomerate, Cisco, is also cutting certain roles to deploy the saved money into silicon, optics and cybersecurity.

• Business underperformance: Epic Games mentioned that engagement in Fortnite was down and they were spending much more than they were earning. This is a different issue and it must concern the investors because the customer base has reduced. 

Layoffs and long-term risks

Voluntary programmes are self-selecting, and the people with the best outside options are often the likeliest to take a package. Whoever leaves, the company will not have chosen them.

Any large number of layoffs due to AI may lead to execution risk. Any roles like software developers, product managers, program managers, etc. being eliminated may have adverse effects on operation rather than some back-office functions.

AI-linked layoffs and job insecurity may erode the company culture, ethos and productivity gains AI is meant to deliver. There are also employees in companies asking for layoff protections such as buyouts before mandatory cuts. 

When support, customer success or product teams are downsized and outsourced to AI-based chatbots, service levels and release cadence can slip. It may also result in customer churn, loss of sales, delayed launches, etc. 

Link between layoffs and stock market

The Stock market is closely linked to the economy and the economy is linked to employment and unemployment rate. Indian investors can be affected in three ways due to layoffs. Your investment portfolio can be affected as AI and global layoffs may affect Indian IT services stocks, US tech holdings and sentiment spillover.  

The five largest Indian IT companies, by headcount, started laying off employees since 2025 due to AI disruptions and evolving customer needs. The risk that AI may impact their revenue growth is being priced in and it is evident how the Nifty IT index has performed in the last two years. 

Any foreign exposure to US-based tech stocks available through international funds may be impacted whenever there is news that a new breakthrough in AI or a new model is released which might disrupt American companies and the economy. 

There can also be spillover effects because a large amount of Indian IT companies’ revenue comes from the US. So when there is weakness in the US tech or banking industry because of AI , it will affect Indian IT services companies. 

What investors should evaluate

Size relative to headcount

Percentages matter more than raw numbers, as single-digit cuts usually amount to routine trimming while double-digit reductions represent a structural reset that can disrupt operations and require a clear plan.

Savings guidance and one-time charges

Look for the expected annual savings and the one-time restructuring charge. This is because charges may hit earnings once, while savings are recurring. Absence of either target or timeline leaves the benefit unproven.

Revenue, margins and free cash flow

Genuine cost cuts should appear as wider operating margins within a few quarters while revenue holds steady; flat margins or free cash flow suggest the reductions were largely cosmetic.

Balance sheet and cash position

A company with a strong net-cash position can restructure on its own timetable, whereas one funding major technology investments with debt has less room for error and must be watched more closely for financing details.

Company’s hiring plans

Layoffs along with targeted hiring or internal reassignment indicate deliberate reallocation of talent. While, a blanket freeze on hiring alongside reductions in spending signals a more defensive posture.

Conclusion

Layoffs must be treated as a signal to be decoded rather than good or bad news. It is not the end of the world or the economy is going to implode. 

AI tech layoffs present a dual economic impact. It may boost corporate efficiency and improve the bottomline. This may increase the stock value of companies who know how to use AI to their advantage.  

However, this may destabilise the white-collar workforce. While automation promises long-term macroeconomic productivity gains, it immediately harms entry-level hiring pipelines. This structural shift should be closely watched by investors, so that they can pick stocks that are likely to perform better in the AI era.