Zoho Pauses Salary Hikes Amid Rising AI Costs

CHENNAI: Software company Zoho has paused its usual annual salary increases for employees and reduced its marketing expenses due to rising artificial intelligence (AI) costs and an uncertain global business environment. The company is taking these steps to manage its expenses as the software industry faces growing challenges.

Zoho co-founder and chief scientist Sridhar Vembu shared the update in a post on X on Tuesday. He explained that the increasing use of AI has significantly raised the company’s expenses. He also pointed to the uncertain market conditions affecting software service companies as another reason for the decision.

Vembu said the company had reduced its marketing budget and informed employees that it would not be able to provide its usual salary increases this year. He also apologised to employees for being unable to avoid the decision.

The Zoho co-founder said the company would make every effort to prevent large-scale layoffs. However, he warned that the overall outlook for software jobs was becoming difficult because of changes in the industry and rising business costs.

Vembu also revealed that Zoho had not increased its employee count for the past 18 months. This suggests that the company has been cautious about expanding its workforce while dealing with the changing business environment.

The growing use of AI is changing how software companies develop products and deliver services. Although AI tools can improve productivity and help businesses complete tasks faster, their use can also increase operating expenses, depending on the scale of adoption and the technology involved.

For Zoho, managing these rising costs while maintaining business operations has become an important priority. Reducing marketing expenses and pausing salary hikes are among the steps the company has taken to control spending.

The announcement also reflects the wider uncertainty facing the software industry, where companies are adjusting their budgets and workforce plans in response to changing technology costs and market conditions.

While Vembu acknowledged the challenges ahead, he said Zoho would continue working to avoid mass layoffs. The company’s immediate focus is on managing expenses and dealing with the uncertain outlook for software businesses and employment.