Zoho Pauses Usual Salary Hikes as AI Costs Rise, Job Cuts Fear Looms

Zoho co founder Sridhar Vembu has said employees will not receive their usual pay increase this year, citing rising artificial intelligence costs, an uncertain software business outlook and geopolitical challenges. The company has also reduced its marketing budget as it tries to manage expenses.

Vembu said Zoho would work to avoid mass layoffs, but warned that the outlook for software jobs was difficult. He added that the company had not increased its employee count for 18 months and was preparing to reshape its business for a period of rapid technological change.

The announcement comes as software and information technology companies reassess hiring plans, employee skills and spending as AI tools become more widely used. For employees, the decision points to possible pressure on salary growth even as companies invest in new technology.

Why Zoho is holding back salary increases

Vembu cited three broad challenges behind the decision: uncertainty in the software market, rising costs associated with AI and a difficult geopolitical environment. He said the company had apologised to employees because it could not avoid cancelling the usual annual pay increase this year.

The company is also cutting marketing expenditure to control costs. The decision suggests that Zoho is reviewing spending across its business as it adjusts to changing technology requirements and uncertain demand. However, the available information does not specify the total amount saved through the marketing cuts or how much the company would otherwise have spent on salary increases.

Zoho has not announced a mass layoff programme in the supplied statement. Vembu instead said the company would work hard to avoid large scale job cuts. His comments indicate that controlling expenses and limiting workforce reductions are current priorities, although they do not guarantee that jobs will remain unchanged.

Rising AI costs add pressure on software companies

Vembu said AI adoption had sharply increased costs for Zoho. He specifically pointed to a fourfold increase in the prices of servers required for data centres. He also said the rapid growth in AI usage was adding to expenses that the company was trying to control.

AI systems can require significant computing capacity, particularly when companies run large models or handle growing volumes of user requests. Servers and data centre infrastructure are part of the cost of providing these services. The figures cited by Vembu highlight the pressure that higher infrastructure costs can place on companies expanding their AI capabilities.

Particulars	Details
Server prices	Fourfold increase, as cited by Vembu
Employee count	No growth for 18 months
Annual pay increases	Usual increase not planned this year
Marketing spending	Budget reduced
Workforce approach	Company aims to avoid mass layoffs
Business outlook	Uncertain, according to Vembu

The statement does not clarify whether the fourfold increase applies to all servers, a particular category of hardware or specific procurement arrangements. It also does not provide a breakdown of Zoho's AI expenditure. The figure therefore describes the cost pressure Vembu cited, not a verified increase across the entire data centre industry.

Zoho plans a business shift over the next three to five years

Vembu said Zoho was in the middle of reinventing itself and that the next three to five years would determine how well that effort worked. The timeline suggests the company expects its business model and operating priorities to evolve as AI changes the software industry.

For Zoho, this adjustment is taking place alongside efforts to limit expenditure and avoid large scale layoffs. The company has not shared a detailed plan outlining which business units, products or employee roles will change. It has also not announced a new hiring target or a timeline for restoring annual salary increases.

The company's decision to freeze its usual pay increase is therefore an immediate cost measure, while the broader reinvention is a longer term process. Employees will be watching for further communication about compensation, staffing and the skills required for future roles.

Vembu's comments also connect with his earlier public views on technology and society. In a separate discussion, Zoho founder Sridhar Vembu's views on social media drew attention to the wider effects of digital technology.

How AI is changing hiring plans across India's IT sector

Zoho's position comes as Indian technology companies reassess workforce requirements. India's IT industry, valued at $315 billion in the supplied source, has traditionally depended heavily on human employees to deliver software development and technology services. Companies are now considering how AI agents and specialised technical skills could change staffing needs.

Tata Consultancy Services chairman N Chandrasekaran has said IT companies may reduce hiring as they work towards a workforce with equal numbers of human employees and AI agents. That outlook reflects concerns about how automation could change demand for some roles, even as companies require workers with newer technical skills.

TCS has also indicated that digital and AI capabilities will account for a large share of future recruitment. The company said 80% of future hires would have digital and AI skills. Its chief operating officer, Arathi Subramanian, provided further details about recruitment during the second quarter.

TCS hiring measure	Figure
Employees added in Q2	4,500
Share of Q2 additions in pure AI roles	25% to 30%
Future hires expected to have digital and AI skills	80%

These figures point to a shift in the skills companies want from new employees. They do not establish that all traditional IT jobs will disappear or that every technology company will follow the same hiring policy. Zoho's pay decision and TCS's hiring plans are separate developments, but both show how companies are adjusting their spending and workforce priorities amid greater AI use.

Infosys is moving employees into specialist roles

Infosys has also announced plans to move a significant share of its workforce into specialised roles as the industry changes. The supplied information says the company plans to transition between 25% and 33% of its 3.2 lakh employees, or roughly one lakh people, into specialist positions.

Infosys also aims to build a team of around 6,000 frontier engineers. The company has ruled out workforce layoffs while pursuing growth through AI, according to the supplied material. Its approach places greater emphasis on changing employee skills and job responsibilities.

The plans show that workforce adjustment can take different forms. Zoho has announced that its usual annual pay increase will not take place this year, while Infosys has outlined a large scale shift towards specialist roles. TCS, meanwhile, has highlighted AI and digital skills in future recruitment.

For employees across the sector, the immediate effects will depend on each employer's compensation decisions, hiring plans and training requirements. The wider debate is also relevant to other business developments in technology, including Kaynes Technology's computing business expansion in India, which reflects investment in computing related activity.

What Zoho employees and the software sector should watch

Zoho has not provided a date for when normal annual pay increases could resume. Vembu's comments instead set out a longer period of business change, with the next three to five years expected to shape the outcome of the company's reinvention.

The next developments to watch include whether Zoho announces further cost controls, how it manages staffing without mass layoffs and whether its AI related expenditure changes. Any future update on employee compensation would also help clarify whether the decision applies only to the current year or forms part of a longer adjustment.

Across the Indian IT sector, hiring plans and demand for specialist AI skills will remain important indicators of how employers are responding. TCS's stated recruitment mix and Infosys's plans for specialist roles provide examples of how workforce requirements are changing. However, the available figures do not establish a uniform policy across the industry.

For now, Zoho's immediate position is clear: it has reduced marketing spending and told employees not to expect their usual pay increase this year. Its longer term approach will become clearer as the company works through the business changes Vembu described.

Frequently asked questions

Why is Zoho not giving employees their usual salary increase this year?

Zoho is withholding its usual annual pay increase this year because of rising AI costs, an uncertain software business outlook and geopolitical challenges. Co founder Sridhar Vembu also said the company had reduced its marketing budget to control expenses.

How much have server prices increased, according to Zoho's Sridhar Vembu?

Sridhar Vembu cited a fourfold increase in the prices of servers needed for data centres. He also pointed to growing AI usage as a source of additional costs, but did not specify the exact server categories or the total increase in Zoho's AI spending.

Is Zoho planning mass layoffs?

Sridhar Vembu said Zoho would work hard to avoid mass layoffs. He also said the company had not grown its employee count for 18 months, although he did not provide a new hiring target or guarantee that no workforce changes would occur.

How long will Zoho's business reinvention take?

Sridhar Vembu said the next three to five years would determine how Zoho's business reinvention works. He did not provide a detailed timeline for individual changes or specify when regular employee pay increases might resume.

How is AI changing hiring at Indian IT companies?

Indian IT companies are placing greater emphasis on AI and digital skills. TCS said 80% of its future hires would have these skills, while Infosys plans to move between 25% and 33% of its 3.2 lakh employees into specialist roles.

What is the outlook for software jobs according to Sridhar Vembu?

Sridhar Vembu described the outlook for software jobs as grim amid an uncertain business environment and rising AI costs. He said Zoho was trying to avoid mass layoffs while reinventing its business over the next three to five years.