Indian IT giants are bracing for a seismic shift after the United States announced a $100,000 one-time fee on new H-1B visa petitions, a move that threatens to upend long-standing business models and send ripples through global technology outsourcing. The fee, set to take effect for petitions filed after September 21, 2025, dwarfs the previous administrative cost of $2,000–$5,000 and, in many cases, matches or even exceeds the median annual salary of H-1B employees, which typically ranges from $80,000 to $120,000 according to The Economic Times.
This dramatic increase means the cost of securing a single H-1B visa could now offset the entire earnings before interest and taxes (EBIT) per employee, as noted by Jefferies analysts. The immediate impact, they warn, will be a sharp reduction in H-1B visa usage—currently accounting for 7–12% of Indian IT firms’ U.S. revenue—in favor of local hiring, subcontracting, and a greater reliance on nearshoring and offshoring strategies.
"Navigating a change in operating model just as the sector is reeling from growth pressures related to tariff uncertainties and weak macroeconomic conditions, and may go through revenue deflation in 2026–27 as AI adoption picks up will be challenging for the sector," Jefferies analyst Akshat Agarwal told The Economic Times.
The timing could hardly be worse for Indian IT companies, which are already contending with weak earnings, slowing global demand, and the looming threat of AI-driven revenue declines. Jefferies recently projected that artificial intelligence could trigger up to a 20% revenue deflation in IT services between 2025 and 2030, with high-margin businesses likely to bear the brunt. Sector growth is expected to remain under 4% CAGR, with persistent margin pressure, as reported by The Times of India.
Foreign institutional investors have responded to the mounting challenges by pulling nearly Rs 62,000 crore from Indian IT stocks in 2025 alone. Major players have seen their stock prices tumble: TCS is down 23%, Infosys 18%, HCL Tech 23%, and Wipro 15% so far this year. Mid-tier firms like Happiest Minds Technologies have also suffered, dropping 20%, while LTIMindtree has limited losses to around 3%.
With the H-1B lotteries and petitions typically run in the fourth and first quarters, the first real impact of the fee hike is expected to be felt in petitions for fiscal year 2027. The move has left investors jittery, with Monday, September 22, 2025, shaping up to be a crucial day for gauging market sentiment. Will domestic buyers step in, or will panic-selling continue to rule the day?
For Indian IT firms, the fee hike is a disruptor, but not an entirely unforeseen one. Since the first Trump presidency, the industry has steadily reduced its reliance on H-1B visas, with less than half of U.S. workforces now dependent on these permits. Instead, companies have been building out near-shore delivery capabilities in places like Canada and Latin America, a shift that now appears prescient. "Over the past decade, similar visa-related challenges have surfaced multiple times, and Indian IT has navigated them effectively," observed Vaibhav Dusad, Fund Manager at ICICI Prudential AMC, in The Economic Times. "The industry has steadily reduced its reliance on H-1B hires while building out near-shore delivery capabilities."
Despite the sticker shock, there is one crucial reprieve: the $100,000 fee is a one-time payment per filing, not an annual charge. As Singhal from Emkay Global explained, "The typical cycle of an H-1B visa (3+3 years) means companies will have to shell out $100,000 only once in six years." This gives companies a window to adapt and strategize. Emkay Global analysts see several ways forward: increasing local hiring, using L1 visas, limiting H-1B use, building cost escalation into contracts, shifting work offshore, and ramping up nearshoring to Canada or Latin America.
"We believe Indian IT companies shall mitigate this impact by higher nearshoring/offshoring and/or hiring local talent," Singhal confirmed. "In the long-term, higher offshoring is likely to mitigate a large part of the impact." The adaptation playbook is already in motion, with companies expected to share higher costs with clients, boost local U.S. hiring, and increase the volume of work sent offshore or to nearshore centers for better timezone alignment.
But the fee hike is not without its second-order effects. "Overall this would lead to some wage inflation in the tech sector in the US, including higher demand for local subcontractors," Dusad predicted. There’s even a potential upside: "The counterpoint is that a shift of more work offshore could also revive some discretionary spending," he added. Contract negotiations will be the immediate battleground, as companies and clients haggle over who shoulders the new costs.
The timeline for implementation offers breathing room. With the proclamation applying only to new H-1B petitions filed after September 21, 2025, IT firms have six to twelve months to adjust their business models. Legal challenges could further delay the impact, and many companies still have unused H-1B visas from previous years, providing an additional near-term buffer. Still, uncertainty abounds. "The uncertainty around the new fee may affect the near-term pipeline, as deals currently in progress may be delayed or put on hold," Singhal cautioned.
For current H-1B employees, there is relief: the fee applies only to new petitions, sparing existing visa holders from immediate financial impact. However, the blow to future hiring is real, and the move is already prompting calls for India to create a more robust domestic ecosystem to reduce dependence on foreign visas. Nilesh Shah, MD of Kotak Mahindra AMC, told The Times of India, "We have to create an ecosystem in India so that our talent doesn’t have to go abroad. Steps like abruptly changing H-1B norms will eventually have adverse effects on the US economy as well."
Kranthi Bathini of WealthMills Securities summed up the prevailing sentiment: "It was completely unexpected. This will increase costs and squeeze margins. The extent of the impact will depend on how the situation unfolds," he told The Times of India.
Yet, the mood among analysts is one of cautious optimism, underscored by the industry’s track record of resilience. "We do not foresee any immediate risks to earnings, though a potential inch-up in onsite wage inflation due to increase in local hiring and the $100,000 fee on new H-1B visas from the next-year lottery cycle would hit earnings in FY27," Emkay Global concluded in The Economic Times.
As Indian IT companies weigh their next moves, all eyes are on the U.S. market and the evolving global tech landscape. The sector’s ability to weather this latest storm—through innovation, adaptation, and strategic realignment—will be tested in the months and years ahead.
