Zoho Skips Salary Hikes This Year as AI Costs Soar: What Sridhar Vembu Said and What It Signals for IT Jobs
The Chennai software maker has frozen hiring for 18 months and cut marketing, and its founder calls the outlook for software jobs 'grim'. Here is what is driving the squeeze.
One of India's most admired software companies has told its staff to expect no pay rise this year. Sridhar Vembu, founder of Zoho, said on October 13 that the company will skip its usual annual salary hikes, blaming soaring costs from artificial intelligence and an uncertain market for software.
The announcement drew attention far beyond Zoho, because the company has long prided itself on never carrying out mass layoffs and on building a large workforce in small towns in Tamil Nadu and elsewhere. If Zoho is tightening its belt, many workers are asking, what does that say about the rest of the industry?
Quick answer
- No salary hikes at Zoho this year, Vembu told employees.
- Zoho has not increased its headcount for 18 months and has cut its marketing budget.
- He said data-centre server prices have roughly quadrupled, and rising AI use is adding heavily to costs.
- He called the outlook for software jobs "grim", but said Zoho would work hard to avoid mass layoffs.
What Vembu said
According to ThePrint, Vembu apologised to employees for not being able to avoid skipping the raise. He explained that the business outlook for software is uncertain and that AI has pushed costs up sharply. Server prices for the data centres that run Zoho's products had increased about four-fold, he said. In August, he had already said that money set aside for new hires was going instead to AI and data-centre costs.
BusinessLine's morning report added that rising AI costs and geopolitical uncertainty were behind both the pay decision and the cut in marketing spending.
Zoho is privately owned and based in Chennai, and has more than 19,000 employees worldwide, according to its website. It sells business software, from accounting and email to customer-management tools, to companies around the world.
Why AI is making software more expensive to run
AI features, such as tools that write emails, summarise documents or answer customer questions, need powerful computer chips running in data centres. Demand for those chips and servers has exploded worldwide, pushing up their price. Every time a customer uses an AI feature, it costs the software company money in computing power, often far more than a traditional feature.
At the same time, many customers are cautious about spending, and AI tools are changing how companies buy software. The result is a squeeze: costs rising faster than revenue.
A wider worry for IT workers
The timing has added to anxiety in India's tech sector. Just days earlier, on October 8, the US suspended several large Indian IT companies, including TCS, Infosys and Wipro, from a key step in the green-card process. Vembu had then urged Indian techies in the US to come home. Critics, including fact-checker Mohammed Zubair, asked what jobs would await them if even Zoho was holding back pay and hiring.
Our explainer on whether AI will take our jobs looks at the evidence. In short, employers expect AI to change what many jobs involve, with routine digital tasks most exposed and demand rising for people who can build, manage and check AI-driven work.
A pay freeze is not a layoff
It is worth separating the two. A pay freeze keeps everyone employed but holds salaries where they are. Layoffs cut jobs. Vembu has explicitly said Zoho will try to avoid the second. For workers, a frozen salary still hurts, especially with inflation rising, but it is a very different situation from losing a job.
What IT professionals can do now
- Build AI skills in your own role. Learn to use AI tools for coding, testing, writing or analysis, and to check their output. That makes you more valuable, not less.
- Keep an emergency fund of at least a few months' expenses, as a buffer in an uncertain market.
- Track your company's direction. Ask managers which products and skills the business is investing in.
- Network and keep your profile updated, even if you are not looking to move now.
- Avoid big new loans until the job market is clearer.
The bigger picture
India's software industry has grown for three decades on a simple model: skilled people, lower costs and steady demand from abroad. AI is changing that model, raising costs for some and lowering the value of routine work. Zoho's decision is one company's response, but it reflects pressures across the industry. How firms balance AI spending, pay and jobs over the next year will matter to millions of Indian families.
For more on the policies affecting Indian IT workers abroad, read our report on the US suspension of green-card filings.
Related reading
Sources
This article draws on the following reporting. Dates are when each source was originally published.
- ThePrint: Sridhar Vembu says no salary hikes at Zoho. AI costs are soaring ·
- TradingView (BusinessLine Morning Report): Top Business & Market Headlines Today — BL Morning Report, October 14, 2026 ·
- Great Andhra: No Hikes This Year: Zoho Employees Hit by AI Cost Surge
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Stories, explainers and features published by The Daily, based on public sources that are listed with every article.
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