Teradata Suspends Raises to Invest in AI

Teradata, a global cloud software company, has informed its 5,100 employees that there will be no salary increases this year as the company shifts funds toward artificial intelligence investments.

The company stated it would redirect the budget typically allocated for annual raises to enhance its AI talent and capabilities. This move is one of the few instances where a company explicitly prioritizes AI spending over employee compensation.

CEO Steve McMillan highlighted in a memo that Teradata’s focus for 2026 is on succeeding in the market through AI. The plan involves significantly boosting investments in AI by reallocating funds generally set aside for salary increases.

A spokesperson for Teradata confirmed that the company is committed to investing in AI for product and service innovation but did not comment further on the budget decision. Employees with over a decade at the company noted that while annual raises aren’t guaranteed, they usually range from 2% to 4%.

Teradata isn’t the only one making such decisions. TTEC, a tech and services firm, also recently halted its 401(k) matches for U.S. employees until the end of 2026. This measure is intended to finance the training and tools necessary for its AI transformation.

Both companies operate within the technology services sector, where the failure to adapt to AI is perceived as a significant threat. A recent survey revealed that nearly 90% of 117 IT professionals plan to increase AI spending in 2026, reflecting a broader trend across diverse industries.

Investments in AI can range significantly, from thousands for small pilot programs to millions for comprehensive transformations. Many businesses are already wrestling with financial pressures from inflation and supply chain issues.

Both Teradata and TTEC have struggled financially, with recent fiscal reports showing a 5% and 3.2% decline in global revenues, respectively.

Additionally, Meta Inc., led by Mark Zuckerberg, has announced significant layoffs and reallocations toward AI initiatives, which many believe are aimed at freeing up resources for AI investments.

Overall, the push for massive AI investments is reshaping American companies beyond just job cuts and hiring freezes, indicating a broader strategic shift in the corporate landscape.