Indian billionaire Sridhar Vembu freezes Zoho pay rises as AI costs soar

Indian billionaire Sridhar Vembu, the founder of business software maker Zoho Corp., said the company will not give employees their usual annual pay increase this year, blaming a fourfold rise in server prices driven by artificial intelligence and an uncertain outlook for the software industry.

"The business outlook for software is uncertain, and AI has raised costs dramatically," Vembu wrote in a post on X on Monday. He pointed to "a massive 4-fold increase in server prices which we need for data centres" and to "AI usage increasing rapidly, leading to much higher expenses, which we are trying to control."

Vembu, 58, said Zoho has already cut its marketing budget. "We have also told our employees that we cannot have our usual pay increase this year," he wrote, adding that he had apologised to staff "for not being able to avoid this."

The Chennai-based company, which employs more than 18,000 people, has not added to its workforce for 18 months, according to the post. Vembu said Zoho would work hard to avoid mass layoffs, something it has not carried out in its three decades of operation, but he did not offer much comfort on the wider job market. "The outlook for software jobs in general is grim," he wrote.

He also cited a difficult geopolitical environment and said the company was "in the middle of reinventing ourselves." "The next 3-5 years will decide how our reinvention has worked," Vembu wrote. He ended the post with a short request: "Please pray for us."

AI pressure on software companies

Vembu's comments point to the two ways the AI boom is weighing on software companies. Demand for AI computing has pushed up the price of servers and data center hardware, while customers are testing AI tools that can do some of the work they once paid software vendors for.

Vembu has spoken publicly for months about the toll AI is taking on technology employment, arguing that the money spent on AI infrastructure is money that would otherwise go to hiring. Zoho runs its own data centers rather than relying fully on large cloud providers, which leaves it more directly exposed to hardware prices.

Zoho, founded in 1996 as AdventNet, sells cloud-based business software including accounting, customer relationship management and email tools. Its customers include Netflix, L'Oréal and PayPal, and the company says it has more than 150 million users worldwide.

The company remains privately held and has never raised outside capital. It reported operating revenue of 123.1 billion rupees ($1.27 billion) for the fiscal year ended March 2025, up 17.7% from a year earlier, while net profit slipped to 31.9 billion rupees ($330 million) from 33 billion rupees, according to regulatory filings reported by Tech in Asia.

Vembu's fortune

Vembu stepped down as Zoho's chief executive in January 2025, handing the role of group CEO to co-founder Shailesh Kumar Davey, and now serves as chief scientist, focusing on research and development, including AI.

He and his two siblings hold a majority stake in the company. Forbes estimates the family's net worth at $5.8 billion and ranks them 46th on its 2026 list of India's richest people.

A Princeton-trained electrical engineer who began his career at Qualcomm, Vembu has built a following in India for running Zoho's operations from rural Tamil Nadu and for pushing Indian companies to build their own technology.