Zoho founder Sridhar Vembu has announced that employees will not receive their usual salary hikes this year, citing rising business costs and uncertainty in the software industry.
In a post on X, Vembu, 58, said the rapid rise of artificial intelligence has sharply increased infrastructure expenses, particularly the cost of servers required for data centres.
He said server prices have risen nearly four-fold, while growing AI usage has also pushed up operating costs.
“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu said, pointing to higher server prices and increasing AI-related expenses.
He added that the challenging geopolitical environment had further complicated the company’s outlook.
Because of these pressures, Zoho has decided to skip its usual annual pay increases.
Vembu said the company has also reduced its marketing budget as part of efforts to control costs.
“We have also told our employees that we cannot have our usual pay increase this year. I have apologised for not being able to avoid this,” he said.
Possible Layoffs Ahead?
In an internal communication reported by ET Now, Vembu is said to have warned that some customers are replacing traditional software products with cheaper AI-built alternatives created through “vibe coding”.
He also acknowledged that the outlook for software jobs has become difficult.
While Zoho has never carried out mass layoffs in its three-decade history, Vembu said the company would work hard to avoid such a situation.
“We will work hard to avoid mass layoffs, but the outlook for software jobs in general is grim,” he said.
He also revealed that Zoho has not increased its employee count for the past 18 months.
“Most of our employees understand the situation. I am thankful to them,” Vembu added.
The Zoho founder said the company is now trying to reinvent itself in response to rapid changes in the software industry.
According to him, the next three to five years could be crucial in determining Zoho’s future.
“Please pray for us,” he concluded.
