India
oi-Madhuri Adnal
Zoho employees will not receive their usual annual salary hikes this year as the company looks for ways to manage rising costs. Founder Sridhar Vembu has said the company is cutting spending, including its marketing budget, as higher artificial intelligence (AI) expenses and an uncertain business outlook put pressure on its operations.
In a post on X, Vembu apologised to employees for the decision and said the company was doing what it could to control costs. He also said Zoho would try its best to avoid large scale layoffs at a time when software companies are facing growing uncertainty.
Zoho founder Sridhar Vembu announced the company is cancelling its usual annual salary hikes due to rising AI and infrastructure costs and business uncertainty, while also cutting marketing spend and aiming to avoid layoffs.
“We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year,” Vembu wrote, adding that he was sorry the company had reached this point.
He also said Zoho had not increased its employee count in the past 18 months. His remarks come as technology companies across the world continue to review their workforce and spending amid changes in the software industry.
According to Layoffs.fyi, more than 1,31,000 technology employees have lost their jobs so far in 2026. Companies such as Microsoft, Amazon, Oracle and TCS have also announced workforce reductions in recent months.
Why Is Zoho Holding Back Salary Hikes?
Vembu has pointed to rising infrastructure costs, particularly server prices and the growing expense of using AI, as major concerns for the company.
As more businesses adopt AI, software companies are spending more on the computing power and infrastructure needed to run these services. Zoho is also dealing with higher operating expenses at a time when the future of the software business remains uncertain.
“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu said in his post. He referred to a fourfold increase in server prices, along with the rising cost of AI usage, as factors adding to the pressure.
He also cited the difficult geopolitical situation as another concern for businesses.
For Zoho, managing these expenses has become increasingly important. The company has so far tried to keep its products and services affordable rather than passing the higher costs on to customers. However, Vembu indicated that maintaining this approach was becoming more difficult.
He thanked employees who had understood why the company could not offer the usual salary increases this year.
“Most of our employees understand the situation. I am thankful to them,” he said.
Sridhar Vembu Says Zoho Is Preparing For A Major Change
Vembu has also indicated that Zoho’s current challenges may not be resolved quickly. The company is working to reshape its business as the software industry changes, with AI playing an increasingly important role.
He said the next three to five years would be important for Zoho as it works through this transition.
“We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked,” he wrote, ending his post with a request for support: “Please pray for us.”
This is not the first time Vembu has spoken about the impact of rising technology costs. In August, he said memory prices had climbed by as much as 500 per cent over the previous year, adding to the difficulties faced by software companies.
“Memory prices, along with AI token prices, have made business very difficult,” he said at the time. He also noted that keeping prices unchanged was becoming harder as expenses continued to rise.
