Zoho Corporation has frozen annual salary increases and cut marketing expenditure as rising artificial intelligence (AI) infrastructure costs and an uncertain software market put pressure on the technology firm's finances, founder Sridhar Vembu said on Tuesday.
Vembu said the company had maintained its workforce at the same level for the past 18 months while trying to avoid mass layoffs, but warned that employment prospects across the software sector remained bleak.
A fourfold rise in server prices, alongside growing expenditure on AI usage, has significantly increased the company's operating costs, Vembu said in a post on social media platform X.
"The business outlook for software is uncertain, and AI has raised costs dramatically," he said, pointing to higher data centre infrastructure costs and the growing expense of AI services.
Vembu also cited a challenging geopolitical environment as an additional pressure on the business.
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The company has reduced its marketing budget and informed employees that it would not be able to provide its usual annual pay increases this year. Vembu said he had apologised to staff for the decision and thanked them for understanding the situation.
He reiterated that Zoho would work hard to avoid mass layoffs, even as the outlook for software jobs remained uncertain.
The company is also undergoing a period of transformation, Vembu said, adding that the next three to five years would determine the outcome of its reinvention.