On September 8, 2026, the U.S. Department of Labor's Inspector General, Anthony D'Esposito, announced via social media that new PERM (Program Electronic Review Management) filings were suspended for two companies: Cognizant and Cloudera. This action is part of a broader federal probe, dubbed "Project Firewall," launched in July 2026 to investigate alleged fraud in H-1B and PERM programs, including claims of wage kickbacks and improper recruitment.
The suspension is an administrative hold under 20 CFR § 656.31, freezing the companies' ability to sponsor new green card applications while the investigation continues. Crucially, it does not affect existing H-1B visas or already-approved green card processes. However, the Inspector General's stark warning—"Handcuffs await"—signals that criminal referrals are actively being considered.
Despite the market's reaction, no official action has been reported against Infosys, Tata Consultancy Services, Wipro, or HCL Technologies. The specific allegations against Cognizant remain undisclosed, as do the number of affected applications and the duration of the suspension.
The suspension blocks new green card filings, not billing. Consequently, no analyst or company has published a revenue-loss estimate. The immediate financial impact is likely to be on retention and operational costs rather than top-line revenue.
For the Indian IT majors, the exposure is tied to their heavy U.S. concentration. Infosys derives 55.7% of its revenue from North America, while HCLTech and TCS report 56.0% and 48.3% respectively. Wipro's Americas segments account for over 60%. This geographic mix makes them sensitive to any U.S. immigration policy shift, even if they are not currently suspended. Investor Presentation +3
Margin pressure is already evident. In Q1 FY27, TCS reported a 24% operating margin, down 130 basis points quarter-on-quarter, largely due to annual salary increments costing 170 bps. Infosys maintained a 21.1% margin but faces pricing pressure from clients demanding AI-driven productivity gains. If visa-related costs rise, these firms would likely lean on levers like reducing onsite mix (Infosys guides for a 0.75–1% reduction) and improving utilization, rather than passing costs directly to clients in a competitive market. Transcript +2
Capgemini presents a different profile. North America accounts for 29% of its group revenue, significantly lower than its Indian peers. Its North America operating margin expanded to 16.5% in H1 2026, driven by strong demand and the WNS acquisition. While less exposed to U.S. visa shocks, Capgemini faces its own margin headwinds in Europe, where restructuring costs are weighing on profitability.
For product companies like Microsoft and Adobe, the impact is structurally different. They price products, not hours. Immigration costs are a small fraction of total compensation and would generally be absorbed in operating expenses. Microsoft filed 1,024 PERM petitions in 2025 and is not classified as an H-1B dependent employer. Neither company has been suspended, meaning their talent acquisition costs remain unchanged for now.
The most tangible risk is human capital. A prolonged suspension could create a talent-retention problem for Cognizant if employees in the green card queue see their permanent residency process stall. Workers approaching the six-year H-1B limit, who rely on a pending green card application to extend their status, may face a hard ceiling, potentially forcing career stagnation or a frantic search for new employers.
However, the data shows that H-1B holders are only about 3–5% of a typical Indian IT vendor's workforce, because only around 20% of staff are onsite. Moreover, reliance on H-1B visas has been declining. Cognizant filed 3,436 Labor Condition Applications in 2025, down from 10,189 in 2018. Wipro and HCLTech report that over 80% of their U.S. workforces are already localized. Transcript +1
None of the Indian majors have announced visa-linked retention packages. Their existing strategies focus on traditional compensation levers. Infosys and TCS recently implemented annual salary hikes, which contributed to margin pressure. If the green card pathway becomes less viable, the industry may need to explore retention bonuses or accelerated local hiring, but no such shifts have been disclosed yet. Transcript +1
The suspension accelerates a trend that was already underway. Indian IT firms have been consciously reducing visa dependence for a decade, shifting toward a "global-first" delivery model. Infosys has been building nearshore centers in the U.S., Canada, Mexico, and Latin America, expecting more work to be executed from these hubs over time. HCLTech operates 70+ nearshore delivery centers with over 90% local talent. Transcript +1
This shift is mirrored in the broader tech ecosystem. Facing stricter H-1B rules and higher fees, U.S. tech giants are expanding their Global Capability Centers (GCCs) in India. Microsoft's Bengaluru R&D center is its largest outside the U.S., and the company has committed $17.5 billion to AI innovation and jobs in India. Big tech added approximately 33,000 workers in India in 2025, an 18% increase.
For every H-1B rejection, companies often hire 0.4–0.9 employees abroad, primarily in India, China, and Canada. The PERM suspension reinforces this logic: if talent cannot come to the U.S., companies will send the work to where the talent is.
The investigation is far from over. The Labor Department has not disclosed the specific allegations against Cognizant, and no criminal charges have been filed. The legal basis for the suspension is an administrative regulation allowing holds "until completion of any investigation".
The next critical development will be a formal Labor Department notice clarifying the scope, duration, and treatment of pending cases. Until then, uncertainty hangs over the industry. Companies are advised to audit their recruitment files, wage determinations, and job posting compliance proactively.
The market has already voted with its feet. Indian IT stocks lost approximately ₹55,000 crore in market value in a single session following the announcement, with Infosys falling over 3% and peers like TCS, Wipro, and HCLTech dropping 2–3%. This selloff reflects fears of a broader crackdown, even if only two companies are currently in the crosshairs.
The PERM suspension is a company-specific shock for Cognizant with industry-wide reverberations. For the Indian IT majors, it is a contingent risk that underscores the importance of their ongoing localization efforts. For Capgemini, it represents a potential relative advantage given its lower U.S. concentration, though not a guaranteed market share gain. For Microsoft and Adobe, it is a background risk factor in a global talent war they are already fighting by expanding their offshore footprints.
The ultimate impact depends on the investigation's outcome. If enforcement remains narrow, the disruption will be contained. If it widens, the industry will accelerate its pivot toward a model where work follows talent, rather than the other way around.
