AI-related workforce cuts are failing to deliver stronger returns on investment, according to analysts, even as technology companies and IT services firms spend billions on AI infrastructure while cutting thousands of jobs to improve profitability.
A recent Gartner survey of 350 business executives at organisations with annual revenue of at least $1 billion found that nearly 80% of companies piloting or deploying autonomous business tools had reduced their workforce. However, job-cut rates were almost identical among organisations reporting strong returns and those reporting modest gains or negative outcomes.
“Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced,” said Helen Poitevin, VP Analyst at Gartner.
“Workforce reductions may create budget room, but they do not create return. Organisations that improve ROI are not those that eliminate the need for people, but those that amplify them by aggressively investing more in skills, roles and operating models that allow humans to guide and scale autonomous systems.”
The findings come as spending on AI systems rises sharply worldwide. Gartner forecasts spending on AI agent software will grow from $86.4 billion in 2025 to $206.5 billion in 2026, before reaching $376.3 billion in 2027.
At the same time, layoffs across the technology sector continue to rise. Layoffs.fyi estimates that more than 101,550 employees across 120 technology companies have lost their jobs in 2026 alone.
“The data shows layoffs are not a reliable indicator of AI success,” said a lead analyst at a domestic broking firm. “Companies generating better returns are usually the ones investing in workforce adaptation, process redesign and AI integration rather than simply reducing headcount.”
Several major companies have paired large AI investments with workforce restructuring programmes.
Oracle has reportedly begun a large-scale restructuring exercise affecting between 20,000 and 30,000 employees globally, or roughly 18% of its workforce. Reports said around 12,000 employees in India may be affected.
The restructuring comes as Oracle shifts resources towards AI and cloud infrastructure. The company has announced plans to invest around $50 billion in AI infrastructure.
India’s largest IT services companies are also restructuring while increasing AI spending.
Tata Consultancy Services reported restructuring expenses of `1,388 crore in FY26 under exceptional items linked to workforce realignment. The company’s headcount fell by more than 23,000 employees during the year.
At the same time, TCS expanded its AI business aggressively. The company reported annualised AI revenue of $2.3 billion in the fourth quarter of FY26, up from $1.8 billion in the previous quarter. It also announced plans for a large AI data centre business in India, including an initial 100 MW deployment that could eventually scale to 1 GW.
Cognizant has also launched a restructuring initiative, Project Leap, with expected costs between $230 million and $320 million. The company said $200 million to $270 million of that amount would go towards severance and employee-related expenses. Reports said between 12,000 and 15,000 employees could be affected.
However, Gartner said AI adoption may eventually create new forms of work rather than permanently reduce employment. “Long term, autonomous business will create more work for humans, not less,” Poitevin said.