Zoho pauses salary hikes and cuts marketing spend amid rising AI costs

Zoho Corporation founder Sridhar Vembu has announced that the company will pause annual salary hikes and reduce marketing expenditures. The decision is driven by sharply rising costs associated with Artificial Intelligence (AI) infrastructure and an uncertain outlook for the global software sector.

Vembu cited a fourfold increase in server prices required for data centers and rapidly growing expenses related to AI usage as primary financial pressures. He also noted that a challenging geopolitical backdrop has compounded these operational difficulties.

To manage these headwinds, Zoho has kept its headcount flat for the past 18 months in an effort to avoid mass layoffs. Vembu described the broader employment landscape for the software industry as ‘grim’ and noted that the company is currently undergoing a period of reinvention that will be critical to its future over the next three to five years.