The H-1B Shock: Impact Analysis for Indian IT

Executive Summary

The Trump administration's $100,000 H-1B visa fee hike, effective September 21, 2025, represents a paradigm shift for Indian IT services companies. While the fee applies only to new petitions (not existing visa holders), it fundamentally alters the economics of the traditional onsite-offshore delivery model that has powered the sector's growth for decades.

1Company Snapshots

TCS (Focus Company)

Revenue Mix: Q1 FY26 revenue of $7.42 billion (-3.1% YoY in CC); North America contributes ~50% of revenues. Strong presence across BFSI (31%), Manufacturing (15%), and Tech/Telecom verticals.[6][7][8][9]

Delivery Mix: Offshore-heavy model with ~80% offshore, 20% onsite mix. Company maintains significant US operations but has been localizing aggressively - current US employee base is 50-60% Americans.

H-1BExposure:Largestrecipientwith5,505H-1Bvisasannually,butrepresentssmallfractionof600,000+ global workforce. Strong local hiring capabilities provide buffer.

Pricing Power: Premium positioning with industry-leading margins (24.5% operating margin). Historical precedence of passing through regulatory cost changes via contract renegotiations.

Infosys

Revenue Mix: $4.94 billion revenue (+3.8% YoY); highest US exposure at ~60% of revenues. Strong in Financial Services (27.9%), Manufacturing (16.1%).

H-1B Dependency: 2,004 H-1B visas with estimated highest percentage of visa-dependent workforce among Tier-1 players. Onsite mix around 25-30%.

Pricing Power: Operating margin of 20.8%, raised FY26 guidance lower end to 1-3%. Strong deal momentum with $3.8B TCV in Q1.

HCL Technologies

Revenue Mix: $3.55 billion (+3.7% YoY); ~45% US revenue exposure. Services revenue grew 4.5% YoY in CC terms.

H-1B Profile: HCL America holds 1,728 H-1B visas. Onsite mix estimated at 30%. Operating margin pressured at 16.3% due to Gen AI investments.

Mid-Cap Players

LTIMindtree: $1.15B revenue, 1,844 H-1B visas, high US exposure (~55%) creates vulnerability. Wipro: 1,523 H-1B visas but 70% US workforce now comprises locals, reducing direct impact. Persistent Systems: Stellar 18.8% YoY growth, but 75% US revenue and 45% onsite mix creates high exposure. Coforge: $442M revenue, claims "minimal impact" from H-1B changes, strong growth momentum.

Indian IT Companies: Q1 FY26 Performance & H-1B Exposure Assessment

2Exposure & Sensitivity Framework

Key Assumptions (Per Company)

New H-1B Petitions: 15-25% of current annual visa intake (companies will drastically reduce new applications)
Critical Onsite %: 60-80% of current onsite roles cannot be immediately substituted
Local Hire Substitution: 50-75% of planned onsite deployments shift to US local hiring
Pass-Through Success: 25-50% for Tier-1, 0-25% for mid-caps
Offshore Rebalancing: +5 to +10 percentage points over 3 quarters

3Scenario Analysis

Base Case Impact (Q+1 to Q+3 Cumulative)

TCS: -50 to -75 bps EBIT margin impact, revenue growth -0.5%
Infosys: -75 to -100 bps EBIT margin, revenue growth -0.8%
Mid-caps (LTIM, Persistent): -100 to -150 bps EBIT margin impact

Bear Case

Zero pass-through success, 25% local substitution, significant delivery delays
Sector EBIT margin compression: 150-200 bps for high-exposure names
Revenue growth impact: -1.5% to -2% for FY26

Bull Case

Strategic pivot accelerated: 75% pass-through success, rapid offshore transition
Margin impact limited: -25 to -50 bps for well-positioned players
Market share consolidation: Tier-1 players gain from mid-cap distress

4Operating Levers & Strategic Response

Immediate Actions (Q+1)

Petition Prioritization: Focus H-1B applications on mission-critical, high-billing roles only
Client Communication: Proactive outreach on pass-through mechanisms and delivery model changes
Local Hiring Acceleration: Expand US campus hiring, acquire local talent pools.

Cross‑Basket Sensitivity (Guide) Petitions vs 0% 25% 50% 75% Plan ↓ / Pass‑Through →

−30% petitions −15–25 bps −10–20 bps −5–15 bps ~flat to −10 bps Base petitions −40–80 bps −25–60 bps −10–45 bps −0–30 bps +30% petitions −70–120 bps −50–100 bps −30–75 bps −15–55 bps

Secondary sliders: Local‑hire +25ppt typically improves EBIT by ~10–25 bps net; Offshore +5ppt over 3 quarters can recoup ~10–30 bps if SLA intact.

Medium-term Adjustments (Q+2-Q+3)

Near-shore Expansion: Scale Canada, Mexico, Costa Rica delivery centers
Offshore Rebalancing: Target 85-90% offshore mix (vs. current 75-80%)
Pricing Realignment: Implement change-in-law clauses in contract renewals

KPIs to Track

Petition Success Rate: % of H-1B applications vs. prior years
Local Hire Velocity: US campus recruitment metrics
Client Pass-through Acceptance: % of contracts successfully repriced
Delivery SLA Impact: Project delay metrics, client satisfaction scores

5Forward Timeline

Q+1 (Oct-Dec 2025): Fee shock absorption, client negotiation intensive.

Q+2 (Jan-Mar 2026): Local hiring ramp-up, margin pressure peak.

Q+3 (Apr-Jun 2026): Steady state with repriced contracts, productivity recovery

6Investment Implications

Relatively Insulated Names

TCS: Scale, margin buffer, proven execution capability
Coforge: Lower absolute visa dependency, strong growth momentum

Execution-Sensitive Names

Infosys, LTIMindtree: High US exposure, significant visa dependency.
Persistent: Explosive growth but vulnerable delivery model.

3-Quarter Positioning

Overweight: TCS, HCL Tech (defensive positioning).

Underweight: High-exposure mid-caps until clarity on pass-through success.

Tactical: Monitor Q+1 earnings for magnitude of impact and management commentary

Disclosures and notes

Compliance Disclaimer

This analysis is for informational purposes only and should not be considered investment advice. Impact estimates are scenario-based and highly sensitive to assumptions around policy implementation, client behavior, and company execution capabilities. Readers should verify all data points with primary company sources and consult qualified financial advisors before making investment decisions. The H-1B policy landscape remains fluid and subject to further regulatory changes.