Why Zoho Employees Will Not Get Salary Hikes This Year? Sridhar Vembu Announces No Annual Salary Hikes Amid AI Cost Hit

Zoho In Spotlight: In the middle of all the chaos surrounding H-1B visas and green cards, Zoho Corporation has given another shocking news.

Zoho has announced that this year, the employees at the company will not receive their usual annual salary hikes. The reason that followed was that rising artificial intelligence (AI) infrastructure costs are now becoming difficult to bear and are putting pressure on the company’s finances.

Sridhar Vembu, co-founder and Chief Scientist of Zoho, cited a reported four-fold increase in server prices and growing data centre expenses.

"The business outlook for software is uncertain and AI has raised costs dramatically," Vembu wrote, pointing to a "massive four-fold increase in server prices" for data centre equipment.

This decision is hinting at an emerging challenge for all the tech giants in line. While AI promises greater efficiency, it comes with a price to pay. This is forcing businesses to rethink spending, hiring and employee salary increments.

Sridhar Vembu Says 'Pray For Us..'

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

Who Is Sridhar Vembu?

Sridhar Vembu is currently designated as the co-founder and Chief Scientist of Zoho Corporation. Zoho is an Indian tech company which is known for its business software and cloud-based services.

Sridhar Vembu’s biggest achievements are: He once helped build Zoho into a major software enterprise without relying on external venture capital funding.

• In January 2025, Sridhar Vembu stepped down as Group CEO to focus on research and development. Co-founder Shailesh Kumar Davey succeeded him as CEO.

• Vembu promotes rural development through technology and supports technology operations around Tenkasi, Tamil Nadu.

• He established Zoho Schools to provide practical training and employment opportunities to young people without conventional academic qualifications.

Why Will Zoho Employees Not Get Salary Hikes This Year?

According to recent reports and an ‘X’ post by the co-founder, Sridhar Vembu, the company will skip its usual annual salary hikes this year due to rising operational costs.

In his ‘X’ post, he cited a four-fold increase in server prices and higher expenses related to the much-talked-about artificial intelligence (AI) infrastructure.

He mentioned that data centres store information and run applications, while AI services require significant computing power and electricity.

The real problem is skipping salary hikes and employees not getting the deserving hike they worked for the whole year for.

Skipping salary hikes does not mean employees will receive salary cuts. Their existing salaries will remain unchanged, but they will not receive their usual annual increments.

Is Zoho Planning Mass Layoffs?

Even after financial pressure, Sridhar Vembu has reportedly said that Zoho is working hard to avoid mass layoffs.

The company is controlling all its expenses, including marketing costs. This will help the company maintain its workforce.

According to this, there has been an extended hiring freeze to limit new recruitment.

All these small steps will surely help Zoho manage rising costs without cutting existing jobs. 

But here is a problem: keeping employees while controlling spending is not easy, specially if expenses continue to rise or business conditions become more challenging.

What Is Zoho Known For?

• Business Software: Zoho offers software for customer relationship management, accounting, human resources and office productivity.

• In-House Development: The company focuses on developing its own products and technology.

• Rural Development: Zoho supports technology opportunities beyond major urban centres.

• Cost Management: Its latest salary decision highlights the challenge of investing in emerging technologies while managing expenses and protecting jobs.