Zoho Freezes Pay Raises Over Surging AI Costs

Zoho's Chief Scientist and Co-founder Sridhar Vembu announced on Tuesday that the company froze pay increases for employees this year. Vembu attributed the decision to rising AI infrastructure costs, specifically noting that server expenses for data centers have increased fourfold. The company is also managing a hiring freeze and reining in marketing budgets to focus on maintaining infrastructure stability.

Zoho's Chief Scientist and Co-founder Sridhar Vembu announced on October 13 that the company has frozen employee pay increases for 2026. This decision reflects growing financial pressures across the software industry as AI adoption drives up infrastructure costs.

The company founder attributed the move to rising AI infrastructure costs, specifically noting that server expenses for data centers have increased fourfold. Vembu stated that while the company will work hard to avoid mass layoffs, the outlook for software jobs in general is grim, and Zoho has not been growing its employee count for 18 months.

Beyond the salary freeze, Zoho has implemented a hiring freeze and is reining in its marketing budgets to focus available resources on maintaining infrastructure stability. In his announcement, Vembu apologized for not being able to avoid the measure.

The company is navigating a broader shift in customer demand toward lower-cost, AI-driven software alternatives. Vembu also pointed out that geopolitical uncertainty is making business conditions tougher, compounding the pressure from rising AI infrastructure expenses. The announcement highlights how rapidly expanding computational demands are reshaping operational decisions at major software companies.