Indian software company Zoho Corporation has paused its usual annual salary increases and reduced marketing expenditure as rising artificial intelligence costs and an uncertain business environment put pressure on its finances. Founder and chief scientist Sridhar Vembu announced the measures on October 13, 2026, warning that the outlook for software jobs remains challenging.
The decision highlights a growing concern in the technology industry: while AI is creating new opportunities, the infrastructure required to develop and operate AI-powered products is becoming significantly more expensive.
Server Prices Rise Fourfold
Vembu said Zoho was facing a sharp increase in infrastructure expenses, including a fourfold rise in server prices required to operate its data centres.
The company is also experiencing higher costs as the use of AI increases across its products and internal operations. AI systems require substantial computing resources, and growing usage can increase expenditure on servers, processing power and related infrastructure.
Vembu said the company was working to control these expenses while dealing with an uncertain software market and challenging geopolitical conditions.
The combination of rising infrastructure costs and pressure on the software business has prompted Zoho to reassess its spending priorities.
Employees Will Not Receive Their Usual Annual Hikes
Zoho has informed employees that it will not provide its usual annual salary increases this year.
Vembu acknowledged the impact of the decision and apologised to employees, thanking them for their understanding during a difficult period.
The company has also reduced its marketing budget as part of its cost-control measures. These steps indicate that Zoho is prioritising expenditure management while it adapts to changes in the technology sector.
However, the salary freeze does not mean Zoho has announced mass layoffs. Vembu said the company would work hard to avoid large-scale job cuts.
Zoho Has Kept Its Employee Count Flat for 18 Months
Vembu revealed that Zoho has not increased its employee headcount for the past 18 months.
His comments reflect wider uncertainty about employment across the software industry as AI-powered tools become more capable of writing code, automating workflows and performing tasks previously handled by human employees.
Software companies are also facing questions about their traditional business models. AI tools now allow some customers to develop customised applications themselves, potentially reducing their dependence on certain commercial software products.
Vembu described the broader outlook for software jobs as grim, although Zoho has not announced a mass layoff programme.
The Next Three to Five Years Will Be Crucial
Zoho is in the middle of a business reinvention as it responds to changing customer needs, rising AI costs and competition from AI-powered software development.
Vembu said the next three to five years would determine the success of this transformation.
For Zoho, the challenge will be to manage infrastructure expenditure while continuing to develop competitive products and serve customers globally. The company will also need to determine how AI can improve productivity without making its operating costs unsustainable.
The developments illustrate a less-discussed aspect of the AI boom: companies are not only competing to build better models and products, but also struggling to manage the cost of running them.
Summary
Zoho has paused its usual annual salary hikes and reduced marketing spending as rising AI expenses and infrastructure costs put pressure on the business. Founder Sridhar Vembu cited a fourfold increase in server prices and higher AI usage costs. The company has kept its employee count flat for 18 months and says it will work to avoid mass layoffs. Vembu believes the next three to five years will be crucial for Zoho’s reinvention.
