Zoho founder Sridhar Vembu has announced that there will be no salary hikes for employees this year amid a rise in artificial intelligence (AI) infrastructure costs.
In a post on X, Vembu explained that the advent of artificial intelligence (AI) systems that require a lot of compute has resulted in a four-fold increase in server prices.
“The business outlook for software is uncertain and AI has raised costs dramatically with a) massive four-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,” Vembu said in his post.
He cited a four-fold increase in server prices and a rapid rise in AI usage as key factors driving up costs. The company is attempting to control the higher expenses amid an uncertain business environment, compounded by geopolitical challenges, he said.
“We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year,” Vembu said, apologising for being unable to avoid the salary freeze and thanking employees for their understanding.
“On top of that is the challenging geopolitical backdrop,” he added.
Vembu described the outlook for software jobs as “grim”.
He said no new employees have been inducted into the firm in the last 18 months.
The Zoho founder said the company would make efforts to avoid mass layoffs despite the challenging business environment. However, he cautioned that the outlook for software jobs remained bleak.
The company is also in the process of reinventing its business to adapt to changing industry dynamics, with the next three to five years expected to be crucial in determining the outcome of these efforts.
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 centers 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.
We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apolgized for not being able to avoid this.
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.
Most of our employees understand the situation. I am thankful to them.
We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us
— Sridhar Vembu (@svembu) October 12, 2026
“We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked,” Vembu said.
