On H1B applying for the first time, completed form 1040 and attached W7 to federal return. Now what happens to state return, do I wait or send it now as well?

Depends on the state.

Assuming that the w-7 is for your spouse, California and Indiana allow you to file jointly with your spouse without the ITIN immediately, then provide the ITIN later when you get.

Most states require the ITIN to file jointly, which means you wait.