Zoho Corporation has frozen its annual salary hikes for 2026 as rising artificial intelligence (AI) expenses, higher server prices and an uncertain software market put pressure on its operations. Founder Sridhar Vembu announced the decision, citing increasing infrastructure costs and global geopolitical challenges affecting the technology industry.
In a post on X, Vembu said server prices had increased fourfold, adding to the cost of running data centres. The company is also facing higher expenses as AI usage grows rapidly. These pressures have forced Zoho to reassess its spending priorities and suspend its usual annual pay increases this year.
The company has also reduced its marketing budget as part of its efforts to manage costs. Vembu apologised to employees for the salary freeze and thanked them for understanding the company’s situation.
The decision comes amid broader uncertainty across the software industry, where businesses are adapting to the rapid adoption of AI and changing customer requirements. Vembu warned that the outlook for software jobs was challenging, noting that Zoho had not increased its employee headcount for the past 18 months.
Despite the pressures, Vembu said Zoho would work hard to avoid mass layoffs. He added that the company was in the middle of reinventing itself, with the next three to five years expected to be crucial in determining the success of its transformation.
The growing use of AI is creating new opportunities for software companies but is also increasing demand for computing infrastructure and data centre capacity. At the same time, AI-assisted development tools are changing how software is built, potentially affecting traditional software business models and employment needs.
Zoho’s salary freeze highlights the cost challenges facing technology companies as they invest in AI while navigating uncertain market conditions. The company’s focus will now be on controlling expenses, adapting its business model and managing the transition without large-scale job cuts.
