Zoho founder Sridhar Vembu has informed staff that the company's standard annual pay increases will be put on hold for the current year. Three pressures — climbing operational costs, pricier server infrastructure, and expanding investment in artificial intelligence — have weighed on the company's ability to keep expenditure in check, he noted.

Vembu also raised the prospect that software roles could grow harder to sustain as companies adopt AI-driven tools to develop lower-cost alternatives to products already on the market. Zoho's approach, as he described it, centres on navigating the current pressures while keeping workforce reductions to a minimum.

Writing costs tied to operating the business have climbed alongside appetite for computing resources, Vembu noted through a post on X. He stated in the post that server costs had climbed to roughly four times their previous level, while accelerating adoption of AI tools was pushing the company's overall expenditure upward — pressures he described as placing the business outlook for software on uncertain ground and driving efforts to bring expenses under tighter control.

He cited the broader international political climate as an additional factor placing pressure on operating costs, describing the backdrop to global trade as one he viewed as testing. Facing those cost pressures, Zoho trimmed its marketing outlays and held back the annual pay rises it would typically offer staff.

In a message to employees, Vembu expressed regret over the decision, while also noting that the company had reduced its marketing expenditure. Staff were informed that the annual pay rise would not be going ahead this year. He expressed regret that the situation had not been avoidable, noting that an apology had been extended.

According to an internal communication obtained by a news outlet, Vembu noted that a portion of Zoho's customers had begun switching away from the company's products in favour of tools developed through AI. Built through a development approach known as "vibe coding," these tools give businesses a potentially lower-cost path to assembling the software they require. Questions about what lies ahead for software businesses and their workforces have grown as a result of the transition.

Vembu stated that Zoho intended to protect its workforce from broad redundancies, though he noted that employment conditions across the software sector as a whole pointed toward a prolonged period of difficulty. Zoho's founder stated in an X post that the company's headcount had remained flat for the past 18 months.

In a statement, he expressed appreciation for the workforce's grasp of where the company stands, noting that the majority of staff have come to terms with the circumstances involved. He went on to express gratitude toward those individuals.

Vembu has indicated that restructuring how Zoho functions is now a priority for him, as artificial intelligence continues to reshape the software industry. After roughly thirty years without resorting to workforce reductions on any broad scale, the organisation now finds itself at the threshold of a transitional chapter.

Wrapping up his address, he described the coming three-to-five-year window as a period that would shape the organisation's path forward, and asked those listening to keep the company in their prayers.