Zoho halts salary hikes as founder Sridhar Vembu cites soaring AI costs

Zoho has halted annual salary increases for its staff this year, pointing to surging infrastructure expenditure driven by artificial intelligence and a subdued global environment for enterprise software.

Founder Sridhar Vembu said in a message on social media platform X that while the broader outlook for software employment has turned severe, the Chennai-based enterprise software maker is adjusting its cost base specifically to avoid large-scale dismissals.

"The business outlook for software is uncertain and AI has raised costs dramatically," Vembu wrote. He said server prices required for running data centres have climbed fourfold, while rapidly widening deployment of artificial intelligence tools across products has generated steep operating overheads that the firm must keep under control.

Cost curbs and hiring restraint

To absorb those capital demands without resorting to widespread sackings, Zoho has cut back on marketing expenditure and told employees that customary pay increments will not take place. Vembu acknowledged the decision was painful and offered an apology to staff for having to implement it.

The pay freeze follows a broader period of operational caution at the privately held firm. Zoho, which employs more than 19,000 people globally from its headquarters in Tamil Nadu, has kept employee headcount flat for the past 18 months.

That disciplined approach stands in contrast to volatile hiring and firing cycles across foreign technology conglomerates, which added thousands of positions during pandemic-era software demand before initiating deep job cuts across engineering and administrative divisions.

"We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim," Vembu said, adding that most Zoho staff have understood the reasoning behind the austerity steps.

Shifting spending to domestic computing capacity

The move illustrates how the global technological shift toward generative tools and automated software workflows is reordering capital budgets across the tech sector. Vembu noted earlier this year that capital which previously financed routine payroll expansion is increasingly absorbed by advanced data centre operations and high-end processing hardware.

At the same time, the company is attempting to reposition its underlying architecture to compete in an AI-dominated enterprise market while retaining its domestic operational foundation. Vembu noted that the company is "in the middle of reinventing" itself, estimating that the next three to five years will determine the outcome of that transition.

The belt-tightening comes as domestic software companies work to secure indigenous computational infrastructure and shield local tech workforces from volatile global demand and tightening visa frameworks abroad, reinforcing self-reliance across critical digital services.