Zoho Skips Annual Appraisals to Protect Jobs: What Sridhar Vembu Revealed

New Delhi, October 13, 2026: Zoho has decided not to provide its usual annual salary increases this year as the company faces rising costs linked to artificial intelligence (AI) and an uncertain outlook for the software industry. Zoho co-founder Sridhar Vembu has apologised to employees for the decision and said the company will work hard to avoid mass layoffs.

In a post on X on October 12, Vembu explained that the growing use of AI is increasing the cost of running data centres and other technology infrastructure. He also pointed to higher server prices and a difficult global business environment.

The decision means Zoho employees should not expect their usual annual pay increases this year. However, Vembu has not announced mass layoffs. Instead, he said the company is trying to control expenses and protect jobs while it works on changing its business for the future.

The announcement has raised an important question for the technology sector: how will software companies manage rising AI costs while protecting employees and staying competitive?

Why Has Zoho Skipped Annual Appraisals in 2026?

Zoho's decision comes at a time when technology companies are spending more on AI tools, computing power and data-centre infrastructure.

Vembu said the business outlook for the software industry was uncertain. He also explained that server prices needed for data centres had increased four-fold, while the growing use of AI was adding to the company's expenses.

According to Vembu, Zoho is trying to control these costs while dealing with a challenging geopolitical environment.

The company has also reduced its marketing budget. Along with this spending cut, it has informed employees that their usual annual pay increases will not be given this year.

Vembu apologised for the decision and acknowledged that the company could not avoid it.

The move shows that even established technology businesses are reviewing their spending as AI changes how software is developed, delivered and used.

What Did Sridhar Vembu Say About Job Security?

One of the most important parts of Vembu's message was his statement about employment.

He said Zoho would work hard to avoid mass layoffs, but warned that the outlook for software jobs in general was difficult. He also revealed that the company had not been growing its employee count for the past 18 months.

This statement does not mean that Zoho has announced a mass layoff plan. It means the company is facing pressure and is trying to manage its workforce carefully.

For employees, the immediate concern is that annual salary growth has been paused. The longer-term concern is how changes in the software market could affect hiring and job opportunities.

Vembu thanked employees who understood the company's situation. He also said Zoho was in the middle of reinventing itself and that the next three to five years would be important in determining how successful that effort would be.

How Is Artificial Intelligence Increasing Zoho's Costs?

AI is often discussed as a tool that helps companies save time and money. However, developing and operating AI-powered services can also be expensive.

AI systems require computing power, servers, storage and data-centre capacity. When more customers and employees use AI features, the infrastructure needed to support those services may become more expensive.

Vembu identified two major cost pressures:

1. Higher server prices

Zoho needs servers to run its data centres and support its software services. Vembu said server prices had risen four-fold, putting additional pressure on infrastructure spending.

2. Growing AI usage

As AI use increases, the company has to manage higher operating expenses. These costs can include the computing resources required to run AI features and services.

Vembu also mentioned the challenging geopolitical situation as another factor affecting the business outlook.

His comments highlight a key issue for technology companies: AI can create new business opportunities, but companies must also manage the cost of building and running AI services.

Are Zoho Employees Facing Mass Layoffs?

At present, the key confirmed announcement is that employees will not receive their usual annual pay increases this year. Vembu has said Zoho will work hard to avoid mass layoffs.

There is a difference between a salary hike freeze and a layoff announcement. A salary hike freeze means employees do not receive the expected increase in pay. A layoff means employees lose their jobs because the employer reduces its workforce.

Zoho has not announced mass layoffs in Vembu's statement. His warning about the software job market, however, shows that the company is taking the current business environment seriously.

Employees should wait for official company communication rather than treating online speculation as confirmation of future job cuts.

The decision also does not establish that every software company will freeze salaries or reduce staff. Each company faces different financial conditions, customer demand and technology costs.

Why Is the Software Job Market Facing Uncertainty?

The software industry is changing quickly as businesses adopt AI tools to write code, automate tasks and build digital products.

One growing trend is the use of AI-assisted development, sometimes called "vibe coding". It allows users to create software by describing what they want in ordinary language and using AI tools to generate much of the code.

Vembu has pointed to the possibility that some customers may replace traditional software products with alternatives built using AI.

If customers can create or customise certain tools more cheaply, software companies may face greater competition. They may need to improve their products, change pricing, invest in AI or find new ways to attract customers.

At the same time, AI infrastructure can be costly. Companies must balance investment in new technology against the money they earn from their products.

These changes do not mean that all software jobs will disappear. However, they may change the skills employers need, the types of software they build and the number of people required for some tasks.

What Is Zoho Doing to Control Costs?

Based on Vembu's public statement, Zoho is taking several steps to manage its expenses.

• Reducing marketing spending: The company has cut its marketing budget to control costs.

• Pausing annual salary increases: Employees will not receive their usual pay increases this year.

• Keeping employee numbers stable: Vembu said the company had not grown its employee count for 18 months.

• Trying to avoid mass layoffs: The company says it will work hard to protect jobs.

• Changing its business strategy: Zoho is working to reinvent itself as the software industry changes.

These measures suggest that Zoho is trying to adjust its spending rather than immediately announcing large-scale job cuts. The company's longer-term plans and the results of its changes will become clearer over time.

What Does This Mean for IT Employees and Job Seekers?

Zoho's announcement is relevant to people working in technology, especially those who follow salary trends, hiring and job security.

For current Zoho employees, the immediate impact is the absence of the usual annual pay increase. Employees may need to review their budgets and consider how the pause affects their financial plans.

For job seekers, the announcement is a reminder that hiring conditions can change even at well-known technology companies. It is sensible to research an employer's business outlook, the skills it needs and the type of work offered before making a career decision.

Students and early-career professionals should also pay attention to AI-related skills. Learning programming fundamentals, problem-solving, system design, databases, cybersecurity and practical AI tools can help them adapt to changing job requirements.

However, it would be incorrect to conclude from one company's announcement that software careers have no future. AI is changing the industry, but companies still need people who can understand customer needs, build reliable systems, maintain software and solve complex technical problems.

Will Zoho Resume Salary Hikes Next Year?

Zoho has not confirmed when its usual annual salary increases will resume.

Vembu said the company is in the middle of reinventing itself and that the next three to five years will help determine how successful this effort has been.

This points to a longer period of adjustment, but it does not confirm a specific date for restoring salary hikes. Any future decision will depend on the company's business performance, costs and official policies.

Employees should rely on updates from Zoho rather than assuming that salary increases will automatically return in 2027.

What Happens Next at Zoho?

The next important developments will be whether Zoho can control AI-related costs, maintain customer demand and adapt its software products to a changing market.

The company will also need to balance spending on technology with employee expectations and its goal of avoiding mass layoffs.

Vembu's comments suggest that the software industry may face a period of change as AI becomes more widely used. However, the full impact on Zoho's workforce and business performance is not yet known.

For now, the company has paused its usual annual salary increases and reduced marketing spending. It has not announced mass layoffs in the statement.

Zoho's decision to skip its usual annual salary increases in 2026 reflects the financial pressure created by rising AI infrastructure costs and an uncertain software market.

Sridhar Vembu has said server prices have increased sharply, AI usage is adding to expenses and the company is working to avoid mass layoffs. He also revealed that Zoho has not grown its employee count for 18 months.

The announcement is an important reminder that AI can bring both opportunities and costs for technology businesses. Zoho's next challenge will be to adapt its products, manage expenses and protect jobs while remaining competitive.

Zoho has paused annual salary increases, but this is not the same as announcing mass layoffs. The company's longer-term employment plans remain uncertain, and further updates from Zoho will be important.