'No Pay Raises This Year': US Tech Company Redirects Salary Budget To AI Investments

Global cloud software company Teradata has informed its 5,100 employees that they should not expect annual salary increases in 2026, as the company has redirected that budget toward artificial intelligence investments. According to an internal memo first reported by Business Insider, CEO Steve McMillan told staff that the company's primary goal for 2026 is to strengthen its position in the rapidly evolving AI market. To support that strategy, Teradata plans to invest more heavily in AI talent, expertise, and product development.

The move effectively pauses the annual salary adjustment cycle that many employees had come to expect, even though such raises were never guaranteed.

AI Ambitions Before Annual Raises

In the memo, McMillan said Teradata would fund its expanded AI investments by reallocating money that would otherwise have been used for annual salary increases. Employees told Business Insider that typical yearly raises at the company generally ranged from 2% to 4%. While those increases were not automatic, they had become a regular part of compensation planning for many long-serving staff members.

The company clarified that employees may still be eligible for performance-based bonuses and equity awards. The policy also applies only in countries where regulations do not require employers to make market-based salary adjustments.

Teradata declined to comment specifically on the decision but said it continues to invest aggressively in AI to drive innovation across its products and services.

A Growing Trend in Corporate AI Spending

Teradata is not alone in making workforce-related sacrifices to fund AI initiatives. Business Insider recently reported that technology services firm TTEC paused 401(k) matching contributions for its US employees through the end of 2026, citing the need to invest in AI tools, training, and capabilities.

Workplace strategist and author Jennifer Moss described the transparency around such decisions as a notable shift in corporate messaging. Rather than framing cost-cutting measures broadly, some companies are now openly telling employees that resources are being redirected toward AI.

"Whether that's more honest or more cynical depends on your read, but it does mark a real shift in what leaders are willing to say in public. And what becomes sayable tends to become more doable," Moss said. 

This trend is particularly visible in the technology sector, where executives increasingly view AI adoption as critical to long-term competitiveness.

A recent survey by RBC Capital Markets of 117 IT professionals found that 90% of respondents expect their organisations to increase AI spending in 2026. AI investments can range from relatively small pilot projects to multi-million-dollar enterprise-wide transformations.

At the same time, many businesses are operating under tighter financial conditions due to inflationary pressures, tariffs, and supply chain challenges, forcing executives to make difficult decisions about where capital is allocated.

Both Teradata and TTEC have faced business headwinds in recent years, reporting revenue declines of 5% and 3.2%, respectively, in their latest financial years.