Zoho Freezes Pay Raises as AI Costs Surge
The software company has also cut marketing spending and stopped expanding headcount as Sridhar Vembu warns of a difficult outlook for software jobs.
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Zoho will freeze its usual annual pay raises this year as rising artificial intelligence costs and uncertainty across the software industry force the company to tighten spending, co-founder and chief scientist Sridhar Vembu said.
In an X post, Vembu said the cost of servers needed for data centers had risen about fourfold, while rapidly increasing use of AI was adding further expenses.
“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu wrote.
Zoho has responded by reducing its marketing budget and holding back its annual salary increase. Vembu said he had apologized to employees for the decision.
The Chennai-based software company is also trying to avoid large-scale job cuts, though Vembu offered a cautious assessment of employment across the wider industry.
“We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim,” he wrote.
Zoho has not increased its employee count for the past 18 months, according to Vembu.
He also pointed to geopolitical uncertainty as another factor weighing on the business.
The comments highlight a tension emerging across the software sector. AI is being promoted as a way to improve productivity and automate more work, but running increasingly capable models also requires expensive computing infrastructure, pushing up costs for companies building AI into their products.
Zoho is reworking its products and strategy as AI changes both the economics of running software businesses and the way software is built.
“We are in the middle of reinventing ourselves,” Vembu wrote. “The next 3-5 years will decide how our reinvention has worked.”
Vembu did not announce layoffs or give a target for reducing the workforce.
