Zoho founder Sridhar Vembu has said the software company will not provide its usual annual salary increases this year as it faces rising operating expenses and an uncertain business outlook. In a post on X, Vembu explained that the company has reduced marketing spending and informed employees about the decision.
Vembu said he had apologised to staff for being unable to prevent the pause in pay increases. He also thanked employees for understanding the financial pressures facing the business. His remarks concern the company’s usual salary increments. They do not establish that Zoho has cancelled every aspect of its employee performance review process.
The founder also said Zoho is working hard to avoid mass layoffs. However, he expressed concern about the wider outlook for software employment and revealed that the company’s employee count has not grown for approximately 18 months. His statement describes an effort to protect jobs, rather than a guarantee against future workforce reductions.
Rising AI Costs Put Pressure on Zoho’s Expenses
According to Vembu, artificial intelligence is increasing costs in two significant areas: the hardware required for data centres and the expense of using AI services. He said server prices had increased fourfold, making infrastructure investment more expensive. Meanwhile, growing AI usage has pushed operating expenses higher, prompting the company to look for ways to control spending.
Vembu also pointed to geopolitical uncertainty as an additional challenge for software businesses. Together, these pressures have contributed to Zoho’s decision to reduce certain expenses and pause its customary annual pay hikes. The comments highlight a challenge facing software companies adopting AI: expanding access to new capabilities can also require substantial spending on computing infrastructure and ongoing usage.
Vembu Outlines Zoho Reinvention Over Next Three to Five Years
Vembu said Zoho is undergoing a broader reinvention to adapt to the changing technology environment. He indicated that the next three to five years would determine how successfully that transformation works.
His message suggests that the company views the current pressures as part of a longer adjustment, with the results of its strategy likely to take time to emerge. He also appealed for support as Zoho works through the transition.
Vembu has previously raised concerns about rising memory and AI usage costs, saying the company had held back from increasing customer prices despite mounting expenses. For employees, the immediate development is the pause in usual salary increases. For Zoho, the longer-term challenge is to manage spending, adapt its business and pursue its stated goal of avoiding mass layoffs.
