US-Based Cloud Firm Halts 2026 Salary Hikes to Fund AI Investments

• Teradata informed employees in January about halting annual salary increases for 2026

• The move applies to all 5,100 employees

• Bonuses and equity awards will continue

Employees of a US-based cloud software company, Teradata, will not receive annual salary hikes this year, the data platform told its 5,100 employees as quoted by Business Insider. The company is planning to redirect compensation budgets toward artificial intelligence investments. 

The company informed its employees about halting their annual increase in salaries in the year 2026, the report said. The decision was outlined in an internal memo by CEO Steve McMillan.

In the memo, the CEO said the company’s target for 2026 is to “win in the market of AI” and to achieve this goal an increased budget on AI talent, innovation and expertise is required.

“We will fund this investment by reallocating the budget from 2026 annual salary adjustments,” he wrote, as quoted by the report.

Bonuses and Equities Will Continue

Though the annual salary hikes were not guaranteed, the move effectively suspends the usual salary increases which generally ranged between 2% to 4%, the employees stated.

Not all avenues for employee compensation have been curtailed. Workers will continue to remain eligible for equity grants and performance-linked bonuses, ensuring that opportunities for rewards tied to company performance and individual contributions remain intact.

The memo further noted that the policy is applicable only in markets where employers are not legally required to implement salary revisions in line with prevailing market benchmarks.

According to a company spokesperson, Teradata is focused on enhancing its products and services by actively spending on AI to fight the growing competition in a rapidly evolving landscape of technology.

Teradata Isn't Alone

According to the memo, Teradata is not the only company reallocating employee compensation toward AI.

TTEC, a business process outsourcing and technology services firm, has recently paused 401(k) retirement contributions for its US employees through 2026.

Reportedly, internal communications stated that the money would be spent on AI-related tools, training and capabilities that are essential to the company's future strategy.

Importantly, the decision comes at a time when numerous companies are balancing increasing AI investment needs against tight budgets. Businesses across sectors have been grappling with tariffs, supply-chain challenges and inflation while simultaneously dealing with rising expenditure on AI technologies.

"Both companies are navigating a paradox: diminishing revenues on one hand and surging AI investment demands on the other, with employees increasingly caught in between".