Chennai: Zoho has paused hikes for its employees and is cutting down marketing spend due to cost inflation, rising AI-related expenses and challenging geopolitical and market conditions, said the company’s founder and chief scientist, Sridhar Vembu.In a post on X this Tuesday, he said that AI usage has driven up costs significantly amid a challenging geopolitical environment. He said company will work hard to avoid mass layoffs. “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 apologised for not being able to avoid this,” Vembu said. He further added that the outlook for software jobs in general is grim.He noted that overall expenses have risen dramatically, largely driven by massive increases in data centre and AI usage costs, which the company is actively trying to control. On a grim note, he said, “We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us.”During Zoho’s annual event in Sept, Vembu acknowledged that AI spending, macroeconomic headwinds, and global conflicts were impacting the company’s margins. Zoho Corporation reported Rs 3,191 crore in net profit for the 2024-25 fiscal year, which is a 3% decline compared to the previous year. Its revenue stood at Rs 13,544 crore for FY25, up 21%. Zoho’s revenue in India increased 47%YoY in FY26, according to Vembu.Sridhar Vembu said there are multiple headwinds, including conflict in the West Asia and oil prices are impacting their business in fast-growing markets like Saudi Arabia, UAE, and other countries in West Asia, while the US market is facing headwinds from geopolitical developments. He also emphasised the risk of customers replacing SaaS vendors by building the software completely in-house, but added that has not happened. “We grew slower than last year but growing nicely,” he said.
