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Zoho will freeze headcount for 18 months as AI costs increase

Vembu says AI gives a 25% to 50% increase in productivity across the full development work.

Zoho will cut its marketing budget, freeze headcount for 18 months and stop salary increases this year. Cofounder Sridhar Vembu says server prices increase 4 to 5 times in one year. AI use also adds token costs.

Gross margin: AI products against traditional SaaS Two bars on a 0 to 100% scale. Traditional SaaS gross margin is 80%; AI products are around 52%. SaaS adding AI loses 12 to 17 points. Gross margin ICONIQ, 2026 80% ~52% Traditional SaaS AI products SaaS adding AI: 12–17 points lost
ICONIQ's 2026 data puts AI products' average gross margin near 52%, against an 80% benchmark for traditional SaaS.

Sources

  1. Rising AI’s Costs Put SaaS Companies Between A Rock And A Hard Placeinc42.com
AI MATTER · NEWS · AI MATTER · NEWS ·16 OCT2026

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