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Zoho will not provide its usual annual pay increase this year, according to an October 13, 2026 report reproducing a statement by co-founder and chief scientist Sridhar Vembu. He said rising server prices and AI-related expenses were adding pressure as the software market faces uncertainty.
What Zoho has said about this year’s pay increases
Vembu’s public statement, as reported by Moneycontrol and The Times of India on October 13, says Zoho cannot offer its usual pay increase this year. He linked the decision to business conditions and costs, rather than announcing a specific pay cut or a new compensation schedule.
The statement addresses the company’s customary annual increase. It does not give a percentage, identify which employee groups are affected, or say how long the decision will apply. Those details matter: a decision not to provide a usual raise is not the same as a stated reduction in existing salaries.
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ET Now separately reported that an internal communication referred to “no compensation” and an annual appraisal review. That report also described concerns about customers replacing software with AI-built alternatives. The communication’s scope and duration are not established in the available reporting, so it should not be treated as confirmation that all Zoho employees have lost compensation or that all appraisals have been suspended.
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Why Vembu says costs are rising
Vembu cited what he described as a fourfold increase in server prices for the data centers Zoho needs, alongside rapidly increasing spending on AI usage. Moneycontrol and The Times of India reproduced those figures and explanation from his statement; neither report independently verifies the server-price increase or provides a breakdown of Zoho’s costs.
Server capacity and AI usage are distinct pressures
In Vembu’s account, higher server prices raise the cost of the infrastructure used for data centers, while increased AI usage is driving additional expenses that the company is trying to control. He did not quantify total AI expenditure or explain which workloads, products, or infrastructure contracts account for the increase. The reported fourfold figure refers to server prices as he described them, not to Zoho’s overall costs.
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He also pointed to an uncertain outlook for software businesses and difficult geopolitical conditions. These are Vembu’s stated reasons for the decision, not an independently audited account of Zoho’s finances. The reporting does not establish how much each factor contributed or whether any one cost item would, by itself, have changed the pay decision.
What Vembu said about jobs and spending
Vembu said Zoho had cut marketing spending and had not grown its headcount for 18 months. Both points are figures and descriptions attributed to him in the October 13 coverage, rather than independently verified company statistics.
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On staffing, he said Zoho would work to avoid mass layoffs, while warning that the outlook for software jobs generally was grim. That is an intention to try to avoid large-scale job cuts, not a guarantee that no employees will be laid off or that all roles are secure. His statement does not specify a hiring freeze, a target headcount, or a number of jobs at risk.
How this fits with Vembu’s earlier comments about AI
In an August 2, 2026 report, Business Today quoted Vembu saying that money that might otherwise have gone to new employees was going toward AI and data-center costs. He also questioned whether a saturated global software market needed much more software. Those remarks provide earlier context for his concerns about investment priorities and market demand; they do not independently establish the cause of the October pay decision.
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Vembu described Zoho as being in the middle of reinventing itself and said the next three to five years would determine how that effort had worked. He did not set out a detailed restructuring plan, product roadmap, or measurable target in the statement reported on October 13.
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The public announcement is a decision about the usual pay increase for this year, explained by Vembu as a response to cost and market pressure. The available reports do not provide an official financial disclosure or an independently verified account of Zoho’s spending, so his explanation should be understood as the company leader’s reported account rather than audited financial evidence.
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- Not stated: the size of the usual increase Zoho is forgoing, or whether any alternative adjustment will be offered.
- Not established: which employees are covered by the separate internal communication, or how long its compensation and appraisal measures last.
- Not quantified: Zoho’s total AI-related expenditure or the number of employees affected by the pay decision.
- Not promised: that layoffs will not occur; Vembu said the company would work to avoid mass layoffs.
Until Zoho provides more detail, the public statement supports a narrow conclusion: the company says it cannot make its usual annual pay increase this year and attributes that choice to rising infrastructure and AI costs, uncertainty in software, and broader conditions.
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