Zoho has cancelled its usual annual salary increases for this year as rising artificial intelligence (AI) costs and an uncertain software market put pressure on the company’s finances. Founder and Chief Scientist Sridhar Vembu said the company is cutting expenses and working to avoid mass layoffs.
Rising AI and Server Costs
Vembu said server prices needed for data centres have increased fourfold, while growing AI usage is adding to operating expenses. He also cited geopolitical uncertainty as a factor affecting the software industry.
As part of its cost-control measures, Zoho has reduced its marketing budget and suspended its usual employee pay increases for the year. Vembu apologised to employees for the decision.
Zoho Working to Avoid Mass Layoffs
Vembu said Zoho would work hard to avoid large-scale job cuts but warned that the outlook for software employment was difficult. He added that the company had not increased its employee headcount for 18 months.
His comments reflect wider concerns across the technology sector about rising AI infrastructure costs, changing software demand and the potential impact of automation on jobs.
Company Plans Strategic Reinvention
Vembu said Zoho was in the process of reinventing its business, with the next three to five years expected to be important in determining the outcome. The company has not publicly detailed a complete restructuring plan in the reported announcement.
The decision highlights the challenge facing software companies as they invest in AI while trying to manage operating costs and maintain sustainable growth.
