The tremor began in New York but was felt most sharply in Mumbai’s financial district. Within hours of the White House confirming a $100,000 fee for new H‑1B visa applications, shares of India’s largest IT outsourcing firms slid, erasing billions in market value. The sale reflected not only investor nervousness about near‑term profits but also more profound reservations about the structural soundness of a business model that has depended for many years on the continuous intake of skilled Indian engineers into the United States.
The H‑1B system, which provides three‑year renewable work visas to high‑skilled foreign professionals, has underpinned India’s $283 billion IT services sector. Indians receive over 70 percent of all H‑1Bs, and in computer‑related positions shared exceeds 80 percent. For the leading firms like Tata Consultancy Services, Infosys, Wipro, HCL Technologies, and Tech Mahindra, over half of yearly revenue comes from the U.S. market. With the new fee regime, every fresh recruit on an H‑1B will now cost as much as a year’s salary, with Citi Research cautioning it will “increase the cost of doing business for IT services companies and end‑clients in the US, impacting margins.”
The mathematics of the shift are brutal. What used to be a $2,000–$5,000 administrative cost is now a one‑time $100,000 payment per filing, with new petitions being the only ones that qualify. With the 2023 median salary for new H‑1B workers at $94,000, all but the most welathy recruits would not even take home enough in the first year to pay the fee. Jefferies analysts estimate that paying it would cancel out EBIT per H‑1B worker, encouraging companies to cut back on visa use—presently 7–12 percent of sales—and move faster in a shift toward local hiring, subcontracting, and near- or offshore-ing.
The market acted quickly. Large-cap stocks declined by about 2 percent, while the mid-caps like Persistent Systems, Coforge, Mphasis, and Cyient declined between 1.7 percent and 4.2 percent in initial London trades. Mid-sized companies are most vulnerable with some getting 75–80 percent of their revenues from the U.S. and not having the diversified delivery chains of their bigger counterparts. “Companies will be forced to redesign their pricing plans to either offer an expensive onshore consulting model or a much cheaper offshore program where most of the work will be done outside the US,” Bloomberg Intelligence analysts Anurag Rana and Andrew Girard said.
The H‑1B allocation process itself creates complications. Petitions are commonly submitted in the spring lottery, with approvals effective in October. Since the charge covers only fresh applications submitted subsequent to September 21, 2025, the initial financial blow should come in FY27. This delay allows firms six to twelve months to acclimatize. There are several levers that Emkay Global can see: increasing local recruitment in the U.S., employing alternative visas like the L‑1 for intra‑company transfers, designing cost escalation clauses into contracts, and increasing offshore delivery from India’s increasing global capability centers.
Several of these adjustments are already well in progress. HCL Technologies indicates over 80 percent of its U.S. employees are visa‑independent; Infosys has over 60 percent. Outsourcer Mphasis reported to investors, “Over the years, we have been steadily reducing our reliance on visas through increased local hiring, acquisitions, and partnerships.” Near‑shore locations in Canada and Mexico are also growing, providing timezone synchronization without the need for a visa load.
But the strategic change arrives at a sensitive time. Indian IT is already facing tepid client demand, slow deal closures, and the potentially dislocating impact of generative AI. Jefferies’ Akshat Agarwal cautions that “navigating a change in operating model just as the sector is reeling from growth pressures related to tariff uncertainties/weak macro, and may go through revenue deflation in 2026–27 as AI adoption picks up will be challenging.”
The ripple effects are not confined to corporate balance sheets. JPMorgan economist Toshi Jain predicts fewer new H‑1B holders will translate to lower remittances to India and lower Indian students opting for U.S. universities, since the fee acts as a “tax” on post‑graduation work. In the United States, immigration policy experts warn that tightening the pipeline of high-skilled workers would make labor shortages in technology and medicine worse, industries where demand is expected to increase and where Indian professionals are over-represented.
For investors, it’s now a matter of execution. Companies that can shift towards delivery offshore, automate on a massive scale, and charge clients more may be able to preserve margins. Those that lag risk prolonged earnings pressure. As Nuvama analyst Vibhor Singhal phrased it, We believe most IT services companies will choose not to pay this higher fee, holding out H‑1Bs for “absolutely critical and irreplaceable job profiles.” The $100,000 question is how rapidly the industry can re‑engineer itself to flourish without the visa that built it.
