Zoho freezes salary hikes amid rising AI costs, vows to avoid mass layoffs
Follow UsZoho founder Sridhar Vembu has said that the company will not give employees its usual salary hikes this year.
The company has also reduced its marketing budget to manage rising expenses.
"The business outlook for software is uncertain," Vembu wrote on X.
Zoho founder Sridhar Vembu has said that software companies are facing a difficult period as AI is raising costs. In a post on X (formerly Twitter), Vembu said Zoho will not give employees its usual salary hikes this year. The company has also reduced its marketing budget to manage rising expenses. He said AI-related costs have increased “dramatically” and “geopolitical backdrop” have added to the challenge. Vembu also revealed that Zoho is trying to avoid massive layoffs, but warned that software jobs in general are “grim.”
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Vembu said the cost of running data centres has risen sharply. According to him, server prices have increased fourfold, adding to the company’s expenses. The rapid growth in AI usage has also increased costs, which Zoho is now trying to control.
“The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centers b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control,” he posted on X. “On top of that is the challenging geopolitical backdrop.”
To manage these pressures, Zoho has cut its marketing spending. It has also informed employees that they will not receive their usual pay increases this year.
Vembu said he had apologised to employees for not being able to avoid the decision. He also thanked staff members for understanding the company’s situation.
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The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centers b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control. On top of that is the challenging geopolitical backdrop. We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apolgized for not being able to avoid this. We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim. We have not been growing our employee count for 18 months now. Most of our employees understand the situation. I am thankful to them. We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us 🙏
— Sridhar Vembu (@svembu) October 12, 2026
Zoho vows to avoid layoffs
“We will work hard to avoid mass layoffs,” he said. However, he added that the overall outlook for software jobs is “grim.” Vembu further revealed that Zoho has not increased its employee count in the past 18 months.
He said Zoho is working to reinvent its business. He believes the next three to five years will be important in determining whether the company’s efforts succeed.
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In a separate post, he also spoke about the importance of building businesses in India. “When another country tells you to go home, you come home. What is the alternative? Beg them to allow us to stay? Stay illegally?,” he said. “There are a million things to build in India, even if software is saturated or goes away.”
His comments come at a time when companies across the technology sector are facing questions about the cost of adopting AI and its impact on jobs. AI tools can help businesses improve productivity, but running them also requires significant computing resources.
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