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Zoho co-founder and chief scientist Sridhar Vembu said the company cannot provide its usual pay increases in 2026, attributing the decision to higher data-center server prices, rising AI usage costs and an uncertain software market. His explanation was reported by The Times of India and Moneycontrol on October 13, 2026; the reports do not independently verify Zoho’s costs or financial position.
What Zoho said about pay increases
Vembu said Zoho would not provide its usual annual pay increase this year. That is the scope of the public statement as reported on October 13: it does not establish that every employee’s compensation has been frozen, or that all compensation reviews have been cancelled.
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In the statement reproduced by Moneycontrol, Vembu linked the decision to a fourfold rise in server prices for the data centers Zoho needs, rapidly increasing expenses from AI use, and uncertainty in the software business. He said Zoho was trying to control the AI-related costs. The reports do not quantify those expenses or independently confirm the claimed increase in server prices, so both figures and explanations should be understood as Vembu’s account, not audited company data.
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Server prices and data centers
Vembu described server prices as having risen fourfold for the data centers Zoho needs. The reporting does not specify which server products, market, starting date or period he was comparing. It therefore does not establish that server prices across the industry—or Zoho’s overall infrastructure bill—rose by the same amount.
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AI usage and software-market uncertainty
He also said AI usage was increasing quickly and generating much higher expenses, which the company was working to control. No total AI spending, per-user cost or breakdown of the relevant services was provided. In Moneycontrol’s reproduction of his statement, Vembu said: “The business outlook for software is uncertain and AI has raised costs dramatically.” He described the software-jobs outlook more broadly as “grim,” but did not provide a forecast or specify how many jobs at Zoho might be affected.
What Zoho said about jobs and spending
Vembu said Zoho had reduced marketing spending and had not grown its headcount for 18 months. Those are reported claims from his statement, not independently verified workforce or spending figures. He also said, “We will work hard to avoid mass layoffs.” That expresses an intention; it is not a guarantee that layoffs will not occur or a promise about particular roles.
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The comment about 18 months without headcount growth does not mean that no employees joined or left during that period. It describes the company’s reported overall headcount growth, and the available reporting gives no employee count or breakdown by team.
How to interpret the separate appraisal report
ET Now separately reported that an internal communication referred to no compensation and an annual appraisal review. That account is distinct from Vembu’s public statement about not providing the usual pay increase. The available report does not establish which employee groups the internal message covered, how long any measure would last, or whether it meant that every appraisal or every form of compensation was suspended. It should not be read as confirmation of a company-wide, indefinite compensation freeze.
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Earlier comments and Zoho’s stated outlook
In an August 2, 2026 report, Business Today quoted Vembu saying that money that might otherwise have gone to new employees was going to AI and data-center costs. He also questioned whether a saturated global software market needed much more software. Those remarks provide earlier context for his views on investment and demand; they do not independently establish the cause of the 2026 pay decision.
Vembu said Zoho was “in the middle of reinventing” itself and that the next three to five years would determine how that effort worked. He did not outline a detailed reinvention plan, specify targets or explain what changes employees or customers should expect. The statement frames the period as consequential for the company, but leaves the practical steps and outcomes open.
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What remains unconfirmed
The October 13 reports do not provide an official financial disclosure or an independently verified account of the costs Vembu cited. They also do not establish how many employees are affected by the pay decision, whether exceptions apply, or how long the decision will remain in effect. The clearest confirmed point in the public reporting is narrower: Vembu said Zoho would not offer its usual pay increase in 2026 and attributed that decision to business uncertainty and rising infrastructure and AI costs.
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