Tech companies lay off workers, spend Rs 6.4 lakh per employee on AI every month

AI is emerging as a major force behind layoffs in the US, with AI-related job cuts already surpassing the combined total of the previous two years. At the same time, some companies are spending as much as Rs 6.4 lakh per employee every month on AI tools and computing power.

In Short

• AI-linked layoffs crossed 87,000 in the first five months of 2026
• Tech firms remain the biggest contributors to job cuts this year
• Top AI-focused companies spend around Rs 6.4 lakh per employee monthly on AI

AI is no longer just helping companies write code or answer customer queries. In 2026, it is increasingly becoming a reason for job cuts, even as businesses pour thousands of dollars into AI tools every month. According to a new report from outplacement firm Challenger, Gray & Christmas, AI has emerged as the biggest reason cited by US companies for layoffs this year. The trend has accelerated sharply over the past few months, with AI-linked job cuts in the first five months of 2026 already exceeding the combined total seen in 2024 and 2025.

The pace of layoffs has picked up noticeably in recent months. After falling below 50,000 announced job cuts in February, the number continued to rise month after month, crossing 60,000 in March and 83,000 in April before reaching more than 97,000 in May. According to Challenger, Gray & Christmas, this was the highest number of job cuts announced in any May since the pandemic-era disruptions of 2020.

What is more interesting is the growing role of AI in these workforce reductions. In January, automation and AI accounted for just 7 per cent of announced job cuts. That number rose to 10 per cent in February, 25 per cent in March, 26 per cent in April and nearly 40 per cent in May.

The impact of AI-driven workforce reductions became particularly visible in May, when nearly 39,000 positions were eliminated due to automation. That single month's figure accounted for a large chunk of this year's AI-related layoffs, which have already climbed to more than 87,000. To put that in perspective, the total number of job cuts linked to AI in the first five months of 2026 is already well above the full-year figures reported in both 2025 and 2024.

"AI is now the leading reason companies give for cutting jobs," Andy Challenger, chief revenue officer of Challenger, Gray & Christmas, said in the report.

The technology sector has been hit the hardest. US-based tech companies announced 38,242 job cuts in May, the highest monthly total since August 2024. So far this year, tech layoffs have climbed 66 per cent to around 1.23 lakh positions, making the industry the biggest contributor to workforce reductions.

Some tech companies now spend lakhs on AI per employee

At the same time, companies are spending aggressively on AI, raising questions about whether businesses are replacing workers with software. New research from the Ramp AI Index suggests that while companies are not yet spending more on AI than on employee salaries overall, some are getting surprisingly close.

Citing the report, Tech Crunch asserted that it describes the top 1 per cent of AI-adopting companies as "AI-pilled" firms. These businesses spend an average of $7,500 per employee every month on AI tools and computing resources. Converted to Indian currency, that works out to roughly Rs 6.4 lakh per employee per month.

The growing AI bill is becoming a talking point across the tech industry. As companies deploy more AI tools and agents, some executives say computing costs are rising rapidly. Nvidia executives have recently pointed to cases where AI infrastructure spending exceeds labour costs, while the chief executive of recruitment startup Mercor said the company now spends more on AI usage for its internal agents than on its workforce.

However, the Ramp report notes that AI spending has not yet overtaken human compensation. The average software engineer in the US earns about $16,000 per month, more than double the AI expenditure of the most AI-intensive companies.

Beyond the top AI users, spending drops sharply. The top 10 per cent of firms spend around $611 per employee each month on AI, while the median company spends just $11.38 per employee, roughly equivalent to the cost of an enterprise software seat.

Even so, AI budgets continue to rise. Among the most AI-focused companies, spending per employee increased 14.1 per cent in the last month alone. Many of these firms are also experimenting with multiple AI models and platforms, moving between premium and open-source options to manage costs.

- Ends