Sridhar Vembu says no appraisals at Zoho this year, company working hard to avoid mass layoffs

The tech industry is going through troubling times and the same seems to be the case for Zoho. Zoho founder Sridhar Vembu has now admitted that the company is finding it hard to control costs due to rising AI prices. Amid this situation, Vembu says, Zoho has decided to cancel appraisals for this year.

On X, Sridhar Vembu revealed that the homegrown company had been trying to cut costs in different areas including marketing. On top of that, Vembu added that he had apologised to his employees for not giving appraisals this time around. "We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year," the Zoho founder wrote. "I have apologised for not being able to avoid this."

At the same time, Vembu admitted that the software industry faced a difficult time. So much so that Zoho was trying its best to avoid mass layoffs. "We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim," Sridhar Vembu stated. "We have not been growing our employee count for 18 months now."

Across the tech industry, many companies have laid off thousands of workers in recent months, including Microsoft, Amazon, Oracle, and TCS. As per layoffs.fyi, over 1,31,000 tech workers have lost their jobs in 2026 alone.

Why is Zoho cancelling appraisals?

Over the past year, Zoho has gained popularity, particularly for its Arattai messaging app. However, the company - like other tech firms - faces the problem of rising costs due to AI. According to Sridhar Vembu, the business situation has become quite difficult for software companies.

"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." Vembu added, "On top of that is the challenging geopolitical backdrop."

The Zoho chief expressed his gratitude to employees who understood the circumstances leading to the no-appraisal decision. "Most of our employees understand the situation. I am thankful to them," he added.

Pray for us, says Sridhar Vembu

But Sridhar Vembu hinted that the rising costs may not be a one-time problem for Zoho. Rather, he claimed that the company was going to reinvent itself to adapt to the situation. But it could take some time before Zoho sees the results.

"We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked," he explained. The Zoho chief requested his followers to pray that the company's plan works out. "Please pray for us," Vembu wrote.

This is not the first time Sridhar Vembu has discussed difficulties in Zoho's business operations due to the evolving tech landscape. In August, Sridhar Vembu had pointed out that memory prices had gone up by as much as 500 per cent in the last year. "Memory prices, along with AI token prices, have made business very difficult," he said at the time. "We have held back from raising prices but it is becoming hard."