Zoho Freezes 2026 Salary Hikes Amid Rising AI Costs, Seeks to Avoid Layoffs

Zoho Corporation has frozen annual salary hikes for all employees in 2026 as rising artificial intelligence (AI) infrastructure costs and an uncertain software market put pressure on the company’s spending. Co-founder and Chief Scientist Sridhar Vembu said Zoho has reduced its marketing budget and will work to avoid mass layoffs.

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In a post on X on October 13, Vembu said the company was facing a sharp increase in server prices, higher expenses from growing AI usage and a challenging geopolitical environment. He said server prices had increased fourfold, raising the cost of running data centres required to support AI workloads.

Vembu also apologised to employees for the decision to withhold the usual annual pay increases and thanked them for understanding the situation.

Zoho Seeks to Control Costs

Vembu said Zoho had not been growing its employee count for the past 18 months. The company has more than 19,000 employees worldwide, according to its official website, as reported by The Indian Express.

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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 🙏

He said Zoho would work hard to avoid mass layoffs but warned that the outlook for software jobs in general remained difficult.

The company has also cut its marketing budget as part of its efforts to control spending. However, Zoho has not announced mass layoffs as part of this decision, and its stated intention to avoid them should not be interpreted as a guarantee that no job cuts will take place.

Rising AI Costs Add Pressure on Software Companies

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The growing use of AI is increasing demand for computing power, servers and data centre capacity. For software companies, these costs come alongside the need to adapt products and business models as AI changes how software is developed and used.

Also Read: TCS Withholds Quarterly Variable Pay for Senior Employees

Zoho’s decision highlights the pressure technology companies may face in balancing investment in AI infrastructure with employee compensation and other operating expenses.

Vembu said Zoho was in the middle of reinventing itself and that the next three to five years would determine how these efforts work out.

Final Comments

Zoho’s salary hike freeze for 2026 reflects the cost pressures and uncertainty facing the software business as AI adoption grows. The company’s decision to control spending while seeking to avoid mass layoffs will be closely watched by employees and the wider technology industry.