Zoho will not provide its usual annual pay increases to employees in 2026, according to reports published October 13. Co-founder and chief scientist Sridhar Vembu attributed the decision to higher data-center server prices, rising AI-use expenses and uncertainty in the software market. The company has not publicly quantified its AI spending or specified how many employees are affected.
What Zoho has said about pay increases
Vembu said Zoho could not offer its usual pay increase this year. The statement, reproduced by The Times of India and Moneycontrol, is about the usual annual increase; the available reporting does not establish whether every employee will receive no compensation adjustment of any kind, or how long the decision will last.
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That distinction matters for employees trying to plan around an expected raise. The public announcement does not give an individual employee’s revised salary, a replacement compensation policy, or a timetable for future increases. Employees should check any direct communication from Zoho for details that apply to their role and location rather than assume the public statement answers those questions.
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Vembu cited a fourfold increase in server prices for data centers and rapidly growing AI usage expenses that the company is trying to control. He also pointed to an uncertain business outlook for software. These are his explanations as reported by news outlets, not independently audited findings about Zoho’s finances. The reports do not provide a total for AI-related spending or a breakdown of how much each factor contributed to the pay decision.
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He said Zoho had cut marketing spending and had not grown its headcount for 18 months. He also said the company would work to avoid mass layoffs, while warning that the outlook for software jobs generally was grim. That is an expressed intention, not a guarantee that there will be no layoffs or other workforce changes.
How to read separate reporting about compensation and appraisals
ET Now separately reported that an internal communication referred to no compensation and an annual appraisal review. That account is not the same as the public statement about the usual pay increase. The available reporting does not establish which employees the internal message covered, what “no compensation” meant in practice, or how long any measures would apply.
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ET Now also reported that the communication referred to some customers replacing software with AI-built alternatives. This is a reported element of that internal message, not a quantified measure of customer losses or an independently established cause of the pay decision. Without further details, it would be inaccurate to conclude that all appraisals or all forms of compensation have been suspended.
What Vembu has said about Zoho’s next phase
Vembu described Zoho as being in the middle of reinventing itself and said the next three to five years would show how that effort worked. He did not set out a detailed plan in the comments reported by Moneycontrol, so the remark signals a period of change rather than a specific commitment about products, staffing or pay.
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 earlier comments provide context for his view of the industry, but they do not independently establish what caused the 2026 pay decision.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What employees can do with the information
Because the public statement leaves individual terms and timing unclear, employees should treat a customary raise as uncertain in their near-term budget until they receive specific confirmation. Useful questions for HR or a manager include:
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- Does the decision affect only the usual annual pay increase, or any other compensation changes?
- Does the annual appraisal still take place, and if so, what decisions can follow it?
- Which employee groups and locations are covered, and when will the policy be reviewed?
- Will the company provide updated guidance if its cost or business outlook changes?
For personal budgeting, it is prudent not to count an unconfirmed increase as income. That is a planning precaution, not evidence that Zoho has announced a permanent pay freeze. The reports available on October 13 do not establish the decision’s duration.
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