Zoho Freezes Salary Hikes as Sridhar Vembu Warns of Grim Outlook for Software Jobs

Zoho will not give employees their usual annual salary increases this year, Founder Sridhar Vembu announced in a post on X, as rising artificial intelligence costs, a fourfold increase in server prices, and geopolitical uncertainty put pressure on the business.

Vembu said the company had cut its marketing budget and was trying to control expenses as AI usage increased. 

“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,” he wrote.

“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu added, citing higher server prices for data centres and rising expenses from increased AI usage.

“We have also told our employees that we cannot have our usual pay increase this year. I have apologised for not being able to avoid this,” he wrote.

He thanked employees for understanding the situation and said the company was working to reinvent itself.

Vembu’s comments come as technology companies face rising infrastructure costs as they expand their AI capabilities. Higher server and memory prices, along with spending on data centres, have increased the cost of developing and running AI products.

In August, Vembu said the IT industry, including Zoho, had not created many jobs in recent years as companies redirected money that would have gone towards hiring to AI and data centre infrastructure. He said the industry needed to address the challenge of creating jobs for India's growing workforce.

Vembu said Zoho was reinventing itself and the next three to five years will likely determine the outcome.