Whalesbook
US H-1B visa approvals are contracting, but data shows technology firms are securing a larger share of the shrinking pool. A US court recently struck down a proposed $100,000 visa fee, offering potential cost relief for Indian IT giants that rely on foreign talent.
What Happened
New data for fiscal year 2026 shows a significant contraction in U.S. H-1B visa approvals. In the first half of 2026, only 51,484 new applications were approved, a sharp drop compared to the 111,271 approvals seen in all of fiscal year 2025. While the overall pool of visas is shrinking, the technology sector has proven more resilient than other industries. Technology and IT consulting firms now account for 58.2% of all new H-1B approvals, up from 39.2% in the previous year. Additionally, a U.S. federal court ruling on June 9, 2026, struck down a proposed $100,000 H-1B visa fee, a move that could significantly impact the operating costs of large companies that depend on this program.
Why This Matters For Indian IT
For Indian investors, the U.S. visa program is a key business metric. Major Indian IT companies like TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra have historically relied on H-1B visas to send skilled engineers to work at client sites in the U.S. (known as the onsite model). When the total pool of visas shrinks, these companies face the risk of either having to hire more expensive local talent in the U.S. or shifting more work to India (the offshore model). The data showing tech firms increasing their share to 58.2% is a positive signal, suggesting that even in a tighter visa environment, IT services remain a priority for U.S. employers.
The Cost Impact of the Court Ruling
The court decision to strike down the proposed $100,000 visa fee is a significant development for the sector. If implemented, such a high fee would have acted as a direct tax on the onsite model, potentially forcing companies to overhaul their workforce strategies or pass on costs to clients. By removing this barrier, the court has provided immediate relief to the bottom lines of IT service providers, helping protect profit margins that were already under pressure from rising costs and intense competition.
The Bigger Business Context
While technology firms are holding a larger share of the shrinking visa pool, the overall decline in total visas is a risk factor. Indian IT firms have been steadily moving toward 'localizing' their U.S. workforce—hiring more American employees to reduce dependence on visas. However, local hiring is generally more expensive than bringing in talent on H-1B visas. The current trend of lower overall visa approvals may force companies to accelerate this local hiring strategy, which could lead to tighter operating margins in the short to medium term. Companies that have already invested heavily in local hiring or automation may be better positioned to handle this shift.
What Could Go Wrong
Investors should be mindful that visa policy is subject to political change. Even with the recent court victory, any future regulatory shifts or further tightening of immigration rules can create uncertainty. Furthermore, the sheer reduction in the total number of visas approved—regardless of the sector’s share—means that staffing U.S. projects is becoming more competitive and potentially more expensive. If the supply of visas continues to fall, the cost of talent could rise, impacting the profitability of IT contracts.
What Investors Should Track
Moving forward, investors may want to monitor management commentary in quarterly earnings reports regarding their visa strategies and local hiring plans in the U.S. Key monitorables include any shifts in the ratio of onsite versus offshore work, changes in U.S. wage costs, and how companies are managing their operating margins in a high-cost environment. Additionally, any further updates on U.S. immigration policy and the legal status of the struck-down fee will be critical, as these factors directly influence the operational stability of the Indian IT sector.