Server Prices Up 4x, No Raise: Why Zoho Froze 2026 Pay Hikes

"I have apologised for not being able to avoid this." That is how Zoho co-founder Sridhar Vembu told the world that employees at the Chennai-based software company will not get their usual pay increase this year.

His reason was not a bad quarter. It was AI. Vembu says the servers Zoho needs for its data centres now cost four times as much, and the company has not grown its headcount for 18 months.

Quick answer

• Zoho has frozen annual salary hikes for all employees in 2026, Vembu announced in a post on X on October 13.
• He cited a 4-fold increase in server prices, fast-rising AI usage costs, an uncertain software market and a tough geopolitical backdrop.
• Zoho has cut its marketing budget and says it will work hard to avoid mass layoffs, but Vembu called the outlook for software jobs "grim".
• For job seekers, the signal is clear: hiring is shifting toward AI skills, not stopping entirely.

What Vembu actually said

Vembu's post was short and unusually candid for a company founder. He wrote that the business outlook for software is uncertain and that AI has raised costs dramatically.

He listed two cost shocks. First, a massive 4-fold increase in server prices for data centres. Second, AI usage rising rapidly inside the company, which he said is leading to much higher expenses that Zoho is trying to control.

"We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim," he wrote, according to Business Standard. "We have not been growing our employee count for 18 months now."

He ended with a line that went viral: Zoho is "in the middle of reinventing ourselves," and the next 3-5 years will decide whether that works. "Please pray for us."

Zoho has over 19,000 employees worldwide, according to its website, as cited by The Indian Express.

Why AI is making software companies poorer, not richer

This sounds backwards. AI is supposed to make software firms more productive. So why is a profitable product company like Zoho tightening its belt?

The answer is infrastructure. Running AI features needs far more computing power, and that means more servers. When server prices quadruple, every new AI feature costs much more to run.

Infosys CEO Salil Parekh flagged the same pressure this week at the Bloomberg New Economy Forum. He told The Economic Times that data centre chips are "massively expensive today," and that it is unclear how long the capacity being built will stay useful.

He also said clients are now asking whether they can use lower-cost tokens for the same work, instead of always paying for the newest models.

The Indian Express adds the bigger backdrop, the so-called "SaaSpocalypse" debate. AI threatens traditional software business models and is putting pressure on India's $315 billion IT services industry.

The wider wave of tech job cuts

Zoho is avoiding layoffs for now. Many others have not. These are the recent cuts cited by The Indian Express:

Bar chart of recent tech job cuts: Oracle about 21,000 globally, TCS more than 12,000 in 2025, Cognizant about 4,000 and Amazon at least 1,000 in its latest round

Source: The Indian Express

A few details matter here. Oracle's cut is global, but a Blind survey estimates India-based workers account for more than half of it. Cognizant's 4,000 is roughly 1 per cent of its headcount.

TCS remains the only Indian IT services provider to announce mass layoffs in the AI era so far, The Indian Express says.

Across the industry, layoff tracker TrueUp counts 1,93,698 people affected by tech layoffs so far in 2026, at a pace of 677 people per day. In 2025, the figure was over 2,45,953.

What it means for Indian freshers and job seekers

Here is the part most headlines skip. Companies are not stopping hiring. They are changing who they hire.

• TCS: 80% of its future hires will have digital and AI skills, Mint reports. Of the 4,500 people TCS added in Q2, its COO said 25 to 30 per cent are pure AI roles.
• Infosys: It hired 20,000 college graduates last year and plans to hire another 20,000 this financial year, Parekh told The Economic Times. Those graduates are trained in AI before working with clients.
• AI services are growing fast: AI work was over 8% of Infosys' revenue last quarter, and Parekh expects it could become almost half of the company's work in two to three years.
• Reskilling at scale: Of Infosys' 3 lakh employees, about 80,000 already work on coding tools for clients and internal projects.

If you are a fresher, the practical takeaway is simple. A plain "I know Java and SQL" resume competes in a shrinking pool. A resume that shows you have built and shipped something with AI tools, such as an agent, a chatbot or an automated workflow, competes in the pool that is still hiring.

Red flags to watch at your own company

Flat headcount for a long stretch. Zoho went 18 months without growing its team before freezing pay.

Marketing cuts. It is often the first budget trimmed when costs rise.

Rising cloud and AI bills in town halls. If leaders keep mentioning infrastructure costs, a pay or hiring freeze may follow.

None of this means panic. It means keeping your skills current and your resume ready.

FAQs

Is Zoho laying off employees? No. Vembu says Zoho will work hard to avoid mass layoffs, though he called the outlook for software jobs grim.

Why did Zoho freeze salary hikes? Vembu cited a 4-fold increase in server prices, rapidly rising AI usage costs, an uncertain software market and geopolitical challenges.

How many people work at Zoho? Over 19,000 employees worldwide, according to the company's website, as cited by The Indian Express.

Are Indian IT companies still hiring freshers? Yes, but with a tilt toward AI skills. Infosys plans to hire 20,000 graduates this financial year, and TCS says 80% of future hires will have digital and AI skills.

This post is based on public statements and news reports. Company plans can change; check official announcements before making career decisions.

Sources

• The Indian Express: Zoho halts 2026 salary hikes, looks to avoid mass layoffs amid surging AI costs
• Business Standard: Zoho freezes annual salary hikes as AI costs rise, software market slows
• Mint: Zoho cancels salary hike, Sridhar Vembu cites rising AI costs
• The Economic Times: High data centre, chip costs and cheaper AI models pose risks, says Infosys CEO
• The Economic Times: AI services may account for almost half of Infosys' work in 2-3 years