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.
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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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.