Zoho skips annual pay hikes as AI costs soar; Vembu calls software job outlook grim

Zoho, the Indian software company, will not give its employees annual pay increases this year, co-founder and chief scientist Sridhar Vembu announced in a post on X on Monday, October 12, 2026. He said the decision was driven by soaring costs linked to artificial intelligence, including a steep rise in data-centre server prices and fast-growing spending on AI usage, along with an uncertain outlook for the software business and a difficult geopolitical backdrop. The company has also cut its marketing budget. Vembu said Zoho would work hard to avoid mass layoffs, but described the outlook for software jobs as "grim".

Zoho is one of India's best-known software product companies, and reports note it has not carried out mass layoffs in its history. When such a company freezes pay and stops adding people, it is a clear signal of how the economics of software are shifting.

The message is that AI is changing where the money goes. Running and serving AI features takes large amounts of computing power, and Vembu's post points to the cost of servers and AI usage rising faster than revenue. Money that used to go into salaries and new hires is now going into hardware and AI bills. That is the opposite of what many young engineers expected when they chose software as a safe, well-paid career.

For job seekers and employees, the practical lessons are sobering but useful. Entry-level hiring in traditional software roles is likely to stay tight, and raises may be smaller across the industry if other companies face the same costs. Skills that help companies use AI efficiently, such as building and running AI systems, cutting computing costs and securing data, are where demand is still growing. Workers should also expect employers to value productivity and versatility over narrow specialisation.

The decision also has a positive side for staff: by holding pay and spending rather than cutting jobs, Zoho is trying to keep its workforce intact through a difficult period.

Short-term: Zoho employees will go without a raise this year, and other software firms facing similar AI costs may follow with smaller increments or slower hiring.

Long-term: If AI computing costs keep rising, Indian software companies may permanently shift spending from headcount to infrastructure, changing the size and shape of the tech job market.

Who is affected: Zoho employees, engineering students and freshers seeking software jobs, mid-career tech workers, and other Indian software product companies.

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