Zoho pauses pay hikes, blames AI and data-centre costs

Zoho founder Sridhar Vembu told employees on X that the company has paused its customary annual pay increase and trimmed marketing spend, citing a sharp rise in AI usage and data-centre costs plus a difficult geopolitical environment. He apologised and said Zoho would work hard to avoid mass layoffs. The numbers explain the caution: FY25 revenue grew 21% to Rs 13,544 crore, but net profit slipped 3% to Rs 3,191 crore. India revenue reportedly grew 47% year on year in FY26, though overall growth slowed. Vembu also flagged West Asia conflict and oil prices hitting Gulf business, US headwinds, and the longer-term risk of customers building software in-house instead of buying SaaS. Key signal: Zoho paused its usual annual pay hikes and cut marketing spend after FY25 net profit fell 3% to Rs 3,191 crore even as revenue rose 21% to Rs 13,544 crore. For hiring leaders, this matters because this is the first clear public signal from an Indian software major that AI infrastructure costs, not demand collapse, are now squeezing the cost base that funds salary inflation. For CHROs and TA heads, the implication is uncomfortable: revenue growth no longer automatically translates into aggressive pay hikes or headcount expansion. Expect SaaS and product firms to get sharper on variable pay, performance-linked increments and role-level differentiation, while protecting AI, data and platform talent. GCCs and IT services firms competing for the same talent should watch whether Zoho's freeze becomes a template, and whether candidates start pricing in slower increment cycles when evaluating offers. Teksands view: A pay freeze at a profitable, founder-led company is a stronger signal than a layoff announcement. It says the money is still there, but the priority order has changed. For hiring leaders, the practical question is whether your increment and offer benchmarks still assume a world where software margins absorb rising compute costs. If not, expect more candidate pushback on fixed-pay-heavy offers and more interest in AI-skilled roles that can command a premium even inside a flat budget.