H-1B Visa Curbs Lift Subcontracting Costs for Indian IT Firms; Infosys Sees Steepest Rise

Tightening US H-1B visa rules and rising application fees are driving a sharp increase in subcontracting costs across India’s top IT companies. Data from UnearthInsight shows Infosys recorded the steepest rise, with subcontracting expenses up 11.5% year-on-year, reaching 8.7% of total revenue in the September quarter (Q2 FY26).

Meanwhile, Tech Mahindra reported a 10.3% increase in subcontracting costs as a share of revenue, but the company’s year-on-year decline stood at 9.6%, indicating optimization efforts.

By contrast, Tata Consultancy Services (TCS) maintained the lowest dependency on subcontractors, with such costs forming only 5% of its revenue. Except for TCS, all top eight IT majors saw a sequential increase in subcontracting expenses during Q2 FY26.

Infosys Leads Increase in Subcontracting Expenses

The UnearthInsight report noted, “Infosys recorded the sharpest rise, driven by demand for new-age AI skills and project-specific location requirements.”

Analysts said that demand uncertainties and short-term deal cycles are also influencing this trend. Companies are increasingly relying on short-term contractors instead of full-time hires to maintain flexibility amid fluctuating client demand.

Also Read: Bajaj Finance Shares Fall After Q2 Results Despite Broadly Meeting Estimates

Why Subcontracting Costs Are Rising?

The data linked the rise in subcontracting costs to tighter US visa norms, higher visa fees, and a growing emphasis on local hiring across global markets.

UnearthInsight added, “Tech Mahindra’s costs declined as it focuses on margin optimization, using consistent reduction in subcontracting as a key lever.”

Industry analysts pointed out that while H-1B visa restrictions contribute to this shift, they form only a small part of a broader trend driven by changing deal structures.

“H-1B changes are a minor factor — the main reason is that IT companies are signing shorter-duration contracts of 6–9 months, often linked to AI and transformation-led projects in the US and Europe,” said Gaurav Vasu, Founder and CEO, UnearthInsight.

IT Firms Prefer Contractors Over Full-Time Hires

According to Piyush Pandey, SVP – Institutional Equity Research at Centrum, “Companies are holding off on expanding full-time hiring until demand improves. When they see short-term spikes in demand for specialized skills, they’re turning to subcontractors instead.”

This shift reflects a cautious approach to workforce expansion amid uncertain macroeconomic conditions and slower deal inflows.

Company Commentary on H-1B Exposure

During their Q2 FY26 earnings calls, IT majors said they have significantly reduced reliance on H-1B visas over recent years:

• TCS: Only 500 employees are currently on new H-1B visas.

• Infosys: Workers requiring H-1B visas form a minority.

• HCLTech: Actively reducing visa dependency while strengthening global delivery models.

• Wipro: Stated the hike in H-1B visa fees will not impact business since 80% of its US workforce is localized.

• Persistent Systems: Has not filed any H-1B applications from India in the last 12 months, despite earning 80% of revenue from North America.

Subcontracting Trends Across Indian IT

While Infosys leads in the pace of subcontracting cost growth, TCS continues to maintain tight cost controls. The overall trend reflects a shift in strategy among Indian IT majors towards nearshore hiring, cost optimization, and shorter project cycles.

The combination of H-1B visa limitations, rising US regulatory costs, and dynamic global demand continues to shape how Indian IT firms structure their global delivery models.

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