Zoho has paused salary hikes for 2026 as the cost of running its business continues to rise. Co-founder and chief scientist Sridhar Vembu has mentioned that the company is trying hard to avoid mass layoffs and as part of this, it has trimmed the budget spent in marketing and other sections. Reportedly, the company hasn’t hired any employees since the last 18 months. The cost cutting is now necessary for the company to deal with the rising expenses on artificial intelligence.
On an X post (formerly Twitter) Vembu has mentioned that the server prices have risen four-fold that they need for the data centers. Along with that, the growing use of AI has added to these expenses. Zoho has cut its marketing budget and paused pay hikes to manage the pressure.
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
Vembu also pointed to global tensions and said the next three to five years would be important for Zoho. His post stated, “We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us.”
AI offers new ways for software companies to grow, but building and running these tools costs money. This leaves companies with a tough choice. They need to invest in AI to stay competitive, but they must also control costs. Zoho's hiring pause and salary freeze show how firms may change their plans to manage this pressure. For employees, the move could mean fewer new jobs and no pay rise for now.
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Marketing, Hiring, Pay and Infrastructure
When the flow of money doesn’t go right, companies first cut the budget of the marketing division. Additional steps include pausing new hires or putting salaries on hold. These steps save money, but they also have risks. Reduced job openings can slow growth, while a pay freeze may affect staff morale.
Lowering spending on AI isn’t as easy as it looks. Servers and data centers support key services, and reducing this spending could slow product growth. Companies must decide which costs they can cut without hurting their future plans. Zoho is trying to save money while continuing to invest in AI. Its next challenge will be to keep the business growing without large job cuts.