Zoho Skips 2026 Salary Hikes As AI Costs Surge; Sridhar Vembu Says Outlook For Software Jobs Is ‘Grim’

Zoho has cancelled its usual annual salary hike for employees in 2026, with co-founder and chief scientist Sridhar Vembu citing a sharp rise in AI-related infrastructure costs, rapid growth in AI usage and an uncertain business environment. Vembu said the Chennai-headquartered software company is cutting its marketing budget and will work to avoid mass layoffs, while warning that the outlook for software jobs is 'grim'.

Why Zoho froze pay hikes

In a post on X, Vembu said Zoho’s data centre server prices had increased four-fold, while rising AI usage was pushing operating expenses higher. He added that a challenging geopolitical backdrop had compounded the cost pressures facing the company.

As part of its cost-control measures, Zoho has reduced its marketing spend and decided against the annual pay increase. Vembu said he apologised to employees for not being able to avoid the decisionIn a post on X, Vembu said Zoho’s data centre server prices had increased four-fold, while rising AI usage was pushing operating expenses higher. He added that a challenging geopolitical backdrop had compounded the cost pressures facing the company.

As part of its cost-control measures, Zoho has reduced its marketing spend and decided against the annual pay increase. Vembu said he apologised to employees for not being able to avoid the decision.

No hiring for 18 months

Vembu said Zoho has not increased its employee count for the past 18 months, indicating a prolonged hiring slowdown at the company. He said most employees understood the situation and thanked them for their support.

While the company has not announced layoffs, Vembu said Zoho would 'work hard to avoid mass layoffs' and cautioned that employment prospects across the software sector are becoming more difficult. He said Zoho is in the middle of 'reinventing' itself and that the next three to five years will determine the outcome of that effort.

AI pressure on SaaS firms

Zoho’s move comes as AI adoption increases demand for computing power and data centre capacity, raising costs for software and SaaS companies. The development also reflects broader pressure on the software industry, where companies are rethinking hiring, pricing and spending as AI changes how enterprise software is built and consumed.

Vembu’s remarks add to concerns around the impact of AI on traditional software jobs, particularly as companies balance investments in AI infrastructure with cost discipline. Zoho has not disclosed the number of employees affected by the salary-hike freeze or announced any workforce reduction.