Zoho Corporation has decided not to announce annual salary hikes for employees this year, with founder Sridhar Vembu attributing the move to a steep rise in artificial intelligence and data centre costs, according to a 12 October post by Vembu on social media platform X.
Zoho has scaled down marketing expenditure and suspended routine annual employee appraisals to manage expenses, as the Chennai-headquartered software major navigates an uncertain demand environment combined with sharp input cost inflation on the AI side.
“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 centres 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,” said Sridhar Vembu, co-founder and chief scientist, Zoho Corporation, in a post on X.
Vembu addressed the human impact of the decision directly in the same post. “I have apologised for not being able to avoid this,” he noted, adding that the company is making ongoing efforts to protect jobs and avoid mass layoffs.
The pattern echoes a position he laid out in August 2026, when he said: “The money that would have gone to new employees is now going to AI and data centre costs, the latter due to the steep rise in server and memory prices.”
The decision to freeze increments at a bootstrapped, profitable company like Zoho carries weight across the Indian software services and SaaS industry, where appraisal cycles and variable pay have been the primary tools for retaining engineering talent. Vembu’s commentary links wage decisions directly to the compute infrastructure bill, a connection that is increasingly visible across global technology firms as AI investment accelerates and revenue payoffs lag spend. Zoho has not published guidance on when appraisals may resume.
