Zoho Cancels Annual Salary Hikes Amid Rising AI Costs

Zoho Corporation will cancel its annual salary increases and regular performance appraisals for employees this year. Founder and Chief Scientist Sridhar Vembu attributed the decision to a four-fold increase in server prices for data centers and rapidly rising expenses associated with artificial intelligence usage, compounded by global geopolitical tensions and economic uncertainty.

To manage these costs, Zoho has reduced its marketing budget and maintained a hiring freeze for the past 18 months. Vembu noted that growth slowed in September, particularly in new revenue and customer acquisition, as some clients migrate to AI-built alternatives created through vibe coding. He stated that suspending raises was necessary to avoid large-scale layoffs, though he warned that the general software job market remains difficult.

Vembu described the company as being in the middle of a reinvention process, stating that the next three to five years will determine the success of this transition. The announcement sparked backlash on social media after Vembu simultaneously urged non-resident Indians in the United States to return to India to contribute to the technology sector. Critics highlighted a contradiction between his call for professionals to return home and his own descriptions of a grim outlook for software jobs.