Zoho's Sridhar Vembu says AI and data center bills are eating the IT hiring budget

Zoho founder Sridhar Vembu went on X on 2026-08-02 with an on-record admission: the IT industry, Zoho included, is not creating new jobs right now. "The money that would have gone to new employees is now going to AI and data center costs, the latter due to the steep rise in server and memory prices," Vembu posted.

The claim lands with extra weight because Vembu is not a marginal observer. Zoho is a Chennai-based, privately held Indian software company that makes workplace and business software. Vembu is the founder. His post describes a slow-down, not a layoff wave: he is saying that AI and infrastructure are absorbing the budget that new hires would have used, not that AI has replaced the existing workforce.

Two independent outlets picked up the post the same day. Hindustan Times and Business Today both preserved his direct quote and added framing: Vembu is asking what absorbs India's young workforce if IT hiring slows and large-scale manufacturing also automates.

NASSCOM's Technology Sector in India Strategic Review 2026, published the same week, gives the data Vembu's claim has to clear. The industry body projects direct tech sector employment at roughly 6 million in FY26E, up 2.3% from the prior year, with revenue crossing the $300 billion mark. That headline growth sits against a much smaller realized base: 126,000 net new employees added in FY25, as the Economic Times noted.

The 2.3% projection is the figure that has to absorb the reallocation Vembu is describing. Indian IT services companies have not been running a U.S.-style layoff cycle. They have been hiring less. Vembu's claim is that the marginal new hire has been priced out by capital going elsewhere, not that AI has replaced the existing workforce.

The caveat that complicates Vembu's framing comes from inside NASSCOM. Chairperson Sindhu Gangadharan flagged that the 126,000 FY25 net adds "may be over-indexed on the GCC side." GCCs are Global Capability Centers: the in-house India units that multinationals run for their own back-office, engineering, and AI work. GCC hiring is not Indian IT services hiring. The same companies whose founders are flagging a slow-down are, in some cases, still adding headcount through the GCC channel, which is owned by a foreign parent and does not show up on Indian IT services books in the same way.

That is the test Vembu's claim has to clear. The 2.3% headline number counts the GCC effect. If the bulk of the new 126,000 hires went into GCCs rather than Indian IT services firms, Vembu's claim that "the industry is not creating new jobs" is more true for his side of the market than for the sector as a whole.

Vembu offered a separate, harder claim alongside the hiring one. Software customers, both large enterprises and mid-sized firms, are redirecting their own IT budgets toward AI, he said, and "even the AI companies growing very rapidly are borrowing and spending huge capex with unclear profit returns." Vembu is arguing that capital is not just rotating within the tech sector; it is rotating into a part of the sector whose return on capital is not yet established.

That brings the structural question he raised, and the one the rest of the year will turn on: if Indian IT services hiring has slowed, GCC hiring is offsetting only part of it, and large-scale manufacturing is also being automated, "what other industry can pick up the slack?" Vembu asked. The 2.3% employment projection is small against the workforce that India's demographics require. The absorption Vembu is asking about, a sector capable of taking on the cohort Indian IT no longer hires and that large-scale manufacturing is automating, is not named in the public industry forecasts.

For the moment, the test of his claim sits in one number: the share of NASSCOM's 126,000 FY25 net adds that went to Indian IT services firms rather than GCCs. Until that split is published, the founder's account and the industry body's headline projection are both consistent with the data, and the disagreement is about which lens a reader should look through.