Zoho Freezes Pay Hikes Over AI Costs: Will Zoho Prices Rise?

What Zoho announced

On October 13, 2026, Sridhar Vembu, Zoho's co-founder and chief scientist, posted on X that the business outlook for software is uncertain and that AI has raised Zoho's costs dramatically. In the same post he wrote: "We have also told our employees that we cannot have our usual pay increase this year."

The post, and the coverage that followed, set out four things:

• No annual pay rise in 2026. Vembu said he had apologised to employees for not being able to avoid it.
• Marketing cut. "We have cut down on our marketing budget," he wrote.
• Flat headcount. Zoho has not increased its headcount for 18 months.
• No mass layoffs planned. Zoho will "work hard to avoid mass layoffs", though he described the outlook for software jobs in general as grim.

Two days later, on October 15, 2026, Zoho CEO Mani Vembu explained the decision to The Economic Times. As reported, he said skipping salary increases and appraisals this cycle was meant to help the company avoid layoffs and avoid passing higher costs on to customers. We have only seen this as a paraphrase in other outlets, not as a direct quote.

Why Zoho's costs went up

Vembu named two causes, and both come from AI:

• Servers cost four times more. The AI boom has pushed up prices for the data-centre hardware Zoho needs. Zoho runs its own data centres rather than renting public cloud, so it buys this hardware directly.
• AI usage is growing fast. Every Zia answer, summary or agent run costs compute. As more customers use AI features, Zoho's running costs rise with them, which Vembu said the company is trying to control.

This is also why Zoho has been building its own hardware. Our piece on the Zoho Nathu La server covers the server Zoho designed in-house to bring down the cost of running AI models. Vembu said Zoho is "in the middle of reinventing ourselves", and the cost of AI is a large part of what it is reinventing around.

Will Zoho raise its prices?

Short answer: nothing has been announced, and Zoho says it is trying not to. Neither Vembu nor Zoho has said anything about raising subscription prices. The CEO's reported reasoning runs the other way: Zoho is taking the cost on its own payroll and marketing budget so that customers do not absorb it.

Here is what that could look like in practice. None of it has been announced; it is what to watch for:

Zoho is not short of customers: by its own count it has more than 1 million+ paying organisations and 150 million+ users, and price is a large part of why many of them chose it. How long Zoho can absorb rising AI costs without passing them on is something only Zoho knows.

What the pay freeze means for your Zoho account

For most businesses, nothing changes today. Your apps, plans, data and support stay the same. The pay freeze is about how Zoho manages its own costs, and the spending cut it has named is marketing.

What it tells you is that AI is expensive to run, and Zoho's competitors buy the same servers. When you compare Zoho with alternatives, compare the total cost including any AI charges, not just the headline per-user price.

There is a local angle too. The same pressures are hitting tech jobs in Kerala; our piece on Kerala IT layoffs and AI covers what has happened there. If your business is in Kerala and runs on Zoho, the checks below apply just the same, and as a Zoho partner in Kerala we can go through them with you.

What to check before your next Zoho renewal

You cannot control what Zoho charges, but you can control what you pay for. This is a good moment for a short licence review:

Do not rush into a multi-year commitment, or out of Zoho, because of a headline. Decide on what your business actually uses. Our Zoho pricing guide breaks down licence and implementation costs. If you would rather have someone go through your account with you, talk to us.