“The visa fee will increase their operating expenses by $100 million to $250 million, about 1% of their revenues,” Moody’s said, referring to large IT players such as Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies, which rank among the world’s top IT service providers by revenue.
Even so, “most large Indian IT services firms can absorb the higher visa costs without a significant deterioration in their operating or financial profiles,” it added, citing their “high profitability, robust financial positions and persistent skill shortages in the US.”
India’s services exports have grown at a compound annual growth rate of 12% between FY2016-17 and FY2024-25, with technology-related and other business services contributing about 80% of total services exports, but the new fee regime threatens to temper that momentum.
The industry’s business model, built on deploying staff from offshore locations such as India to client sites in the US, makes it heavily dependent on H-1B visas, with the computer-related technology sector accounting for around 70% of such visas issued over the last five years. Within this, “leading Indian IT services companies, such as Tata Consultancy Services Limited and Infosys Limited, have consistently ranked among the top H-1B sponsoring companies,” while HCL, LTIMindtree, Wipro, Tech Mahindra and Mphasis also feature prominently among key sponsors, Moody’s pointed out.
Despite the jump in visa costs, the immediate margin impact on the top-tier IT firms is expected to be modest. If companies maintain historical levels of H-1B sponsorship, “the resulting increase in operating expenses will constitute just around 1% of revenues,” with the EBITA margin hit “limited to around 100 basis points,” Moody’s estimated.
The agency highlighted that Indian IT majors’ EBITA margins of 19%-26% already exceed those of global peers at 10%-17%, and that many maintain “substantial net cash positions,” including around $7 billion at TCS and $4 billion at Infosys as of 31 December 2025, reinforcing their capacity to absorb higher costs.However, Moody’s cautioned that “small and mid-sized companies may find it difficult to absorb these additional costs” because of lower margins and limited liquidity. Such firms “will struggle to offset higher costs without compromising profitability or delaying investments in growth areas such as AI and cloud,” a trend that could “accelerate industry consolidation, as scale and financial strength become critical differentiators,” it said.
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Moody’s also underlined that structural talent shortages in the US will anchor demand for Indian IT services despite tighter immigration rules. The US computer and IT sector is projected to see around 300,000 job openings annually through 2034, but only about 100,000 computer science graduates with US citizenship or permanent residency enter the workforce each year, leaving “an estimated annual shortfall of around 200,000 workers,” the report noted.
Against this backdrop, India’s large pool of English-speaking STEM talent remains critical, with Indian nationals accounting for 70%-75% of all H-1B visa approvals since 2020 and India producing about 2.5 million STEM graduates annually compared with 850,000 in the US.
To mitigate visa-related risks over time, Indian IT firms are stepping up investments in automation and artificial intelligence.
“Many Indian IT services companies are accelerating investments in AI to reduce costs and improve efficiency,” Moody’s said, adding that leading firms are embedding generative AI to automate routine coding, testing and maintenance tasks, which will mean “fewer employees, especially in on-site customer locations,” and therefore lower dependence on H-1B visas in the longer term.
That shift, however, comes with near-term costs, as “capital spending on building AI infrastructure, employee training and reskilling, and ecosystem partnerships continues to grow,” and free cash flow is likely to “remain under pressure over the next 1 to 2 years.”
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)