"The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centres b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control. On top of that is the challenging geopolitical backdrop," he wrote on X.
In a sad news for Zoho employees, Sridhar Vembu said that the company has reduce its marketing budget, adding that salaries will not be increased this year.
"We have cut down on our marketing budget. 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, however, added that the company will work hard to avoid layoffs but the general outlook for software jobs is grim.
Vembu said, "We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim. We have not been growing our employee count for 18 months now. Most of our employees understand the situation. I am thankful to them. We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us (sic)."
Read Sridhar Vembu's full post here
The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centers b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control. On top of that is the challenging geopolitical backdrop. We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apolgized for not being able to avoid this. We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim. We have not been growing our employee count for 18 months now. Most of our employees understand the situation. I am thankful to them. We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us 🙏
— Sridhar Vembu (@svembu) October 12, 2026
He, however, did not provide details on the number of employees impacted by the salary decision or the overall increase Zoho's AI-related expenditure.
Slowing growth, products being replaced by AI-built options
In an internal email accessed by ET Now, Sridhar Vembu said that while Zoho is still growing at 12%, the growth slowed more than expected in September, especially in new revenue and customer acquisition.
"First of all I want to apologise to all our employees that we do not have a compensation and annual appraisal review this year," he wrote. "I do not want to take your loyalty for granted and I do feel pain that I have let you down. I am working hard to figure out how to reinvent ourselves so that we can reignite growth."
He added that some customers are opting out of Zoho's software products and going for AI-built alternatives made through "vibe coding". Vibe coding refers to generating code with simple AI prompts instead of traditional development.
Warning against overreliance on AI, Vembu said that he wants engineers to use these tools while having a full understanding of the code and responsibility for it.
While the message does not lay out a detailled plan on what will happen next, Vembu said that he is working on how Zoho could "reinvent" itself and restart growth.