Zoho Freezes 2026 Pay Hikes, Vows to Avoid Mass Layoffs as AI Costs Bite

AKD 2 min read

Zoho will freeze annual salary hikes for all employees in 2026, as surging AI infrastructure costs and an uncertain software market strain the Chennai-based SaaS major’s spending.

Co-founder and chief scientist Sridhar Vembu said the company is “working hard” to avoid mass layoffs and has already trimmed its marketing budget. In a post on X on Tuesday, October 13, he warned that the software business outlook is uncertain and that AI has raised costs dramatically.

He cited two pressures: a four-fold increase in server prices needed for data centres, and rapidly rising AI usage driving up expenses. Vembu also pointed to a “challenging geopolitical backdrop.” He wrote: “We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apologized for not being able to avoid this.”

Zoho, which has over 19,000 employees worldwide, has not grown its headcount in 18 months. Vembu said most employees understand the situation and described the company as being “in the middle of reinventing ourselves,” adding that the next three to five years will determine how its reinvention has worked.

The move comes amid the “SaaSpocalypse” debate, as AI threatens traditional software models and pressures India’s $315-billion IT services industry. Giants such as TCS, Wipro, Infosys and Cognizant are cutting costs and rethinking contracts as clients bring more work in-house.

Layoff tracker TrueUp estimates 644 tech layoffs so far in 2026, affecting 1,93,698 people — about 677 per day. Last week, Amazon announced fresh cuts impacting at least 1,000 workers, following a 2025 round reportedly affecting around 30,000. Oracle is shrinking headcount by about 21,000 globally, with India-based workers estimated to bear more than half, per a Blind survey. Cognizant announced cuts of around 4,000 employees, roughly 1 per cent of its workforce. TCS remains the only Indian IT major to announce mass layoffs in the AI era, cutting more than 12,000 roles in 2025.

Source: The Indian Express, Technology Desk, updated Oct 13, 2026.