Amidst the strict rules and controversies regarding visas for professionals from India and other countries in America, Sridhar Vembu, co-founder of Indian software company Zoho, was seen appealing to Indian talents to return home. Now, just a few days later, citing the increasing expenses of AI in his company, he has hinted at a financial crisis. This time, Zoho has decided not to give salary hike or increment to the employees. There is also a fear of retrenchment among the employees.
Sridhar Vembu gave signal of crisis!
Software company Zoho co-founder Sridhar Vembu said on Tuesday that the company has decided not to hike the salaries of its employees this year due to rising costs and uncertain business conditions. He told that the company has also cut its marketing budget.
In a post on social media platform
Vembu said- I apologize
He told that the prices of servers required for data centers have increased almost 4 times. Also, the use of AI is increasing rapidly, due to which there has been a significant increase in operating expenses. Apart from this, global geopolitical conditions also remain a challenge for business.
Vembu said, ‘We have cut our marketing budget. We have also told the employees that it will not be possible to give a normal salary hike this year. I apologize to him for not being able to avoid it.
The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centers b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control. On top of that is the challenging geopolitical backdrop. We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apolgized for not being able to avoid this. We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim. We have not been growing our employee count for 18 months now. Most of our employees understand the situation. I am thankful to them. We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us 🙏
— Sridhar Vembu (@svembu) October 12, 2026
He further said that the company will do its best to avoid large-scale layoffs, but the employment outlook in the software industry appears challenging at the moment. He told that Zoho has not made any increase in the number of employees in the last 18 months.
Vembu said that most of the employees understand the current circumstances and he also expressed his gratitude to them for this.
‘The next 3 to 5 years will decide…’
Vembu said, ‘We are in the process of preparing ourselves afresh. The next 3 to 5 years will decide how successful our change was.
In May this year, Sridhar Vembu had also expressed concern over the increasing valuations of technology companies regarding AI. He said that investors’ enthusiasm about Artificial Intelligence (AI) has taken the valuations of many big tech companies to such a level that situations like the dot-com bubble are visible.
At that time, while mentioning companies like Nvidia, Apple, Alphabet, Microsoft, Meta Platforms and Micron Technology, he had said that many of these companies are trading at very high valuations compared to their annual revenues.
Vembu also cited a statement by Scott McNeely made after the dot-com era, which said that if investors valued a company at ten times its annual revenues, the company would have to perform exceptionally well over a long period of time to justify that valuation.
Source: ndtv.in
