Artificial intelligence is changing the way companies operate, but for thousands of employees at one US technology firm, it could also mean missing out on a pay rise.
According to a report by Business Insider, cloud software company Teradata has informed its 5,100 employees that they will not receive annual salary increases in 2026. Instead, the company plans to redirect those funds towards expanding its artificial intelligence capabilities.
The decision has sparked discussion about how far companies are willing to go to stay competitive in the AI race and whether employees could end up footing part of the bill.
Why Is Teradata Freezing Salary Hikes?
In an internal memo cited by Business Insider, Teradata CEO Steve McMillan said the company's top priority for 2026 is to strengthen its position in the growing AI market.
He reportedly told employees that the company plans to invest more heavily in AI talent, products and technology.
"We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments," McMillan said, according to Business Insider.
The move means that money typically used for annual pay rises will instead be spent on AI-related initiatives.
How Much Could Employees Lose?
While annual salary increases at Teradata were never guaranteed, employees told Business Insider that yearly raises generally ranged between 2 per cent and 4 per cent.
For many workers, these adjustments help offset rising living costs and inflation.
The decision means employees may have to wait another year before seeing an increase in their base salary.
Will Employees Receive Any Extra Compensation?
The company has not completely removed all forms of employee rewards.
According to the report, workers may still be eligible for:
- Performance-based bonuses
- Equity compensation
- Other incentive programmes
However, their fixed annual salary is expected to remain unchanged during 2026.
The policy mainly applies to countries and regions where employers are not legally required to make market-based salary adjustments.
AI Spending Is Becoming A Top Priority
Teradata is not the only company making difficult financial decisions in order to invest in artificial intelligence.
Business Insider reported that technology services company TTEC has paused retirement contributions for US employees through 2026 to help fund AI tools, infrastructure and employee training.
Across the technology industry, companies are increasing spending on AI at a rapid pace.
A recent survey of IT leaders found that 90 per cent of organisations plan to boost AI investment in 2026, with some projects costing millions of dollars.
Why Are Companies Investing So Heavily In AI?
Many business leaders believe AI will play a crucial role in future growth.
Companies are using artificial intelligence to:
- Improve customer service
- Automate repetitive tasks
- Analyse large amounts of data
- Develop new products
- Increase productivity
As competition intensifies, businesses are under pressure to adopt AI quickly or risk falling behind rivals.
For many firms, investing in AI is no longer seen as optional.
Tough Economic Conditions Are Adding Pressure
The shift towards AI comes at a time when many companies are facing financial challenges.
Higher inflation, global trade tensions, supply chain disruptions and slower economic growth have forced businesses to make difficult choices about where to spend money.
Both Teradata and TTEC have reported declining revenues in their most recent financial year, according to Business Insider.
That has increased pressure on management teams to focus spending on areas they believe will generate future growth.
Employees Face A New Reality In The AI Era
The decision by Teradata highlights a growing trend in the technology sector.
For years, many workers expected annual salary increases as a standard part of employment. However, as companies pour billions into artificial intelligence, some employees may find that budgets previously allocated to pay rises are being redirected elsewhere.
While business leaders argue that AI investments are necessary for long-term success, employees may question whether the benefits will eventually reach the workforce as well.
What This Means For The Future Of Work
The debate surrounding Teradata's decision reflects a larger question facing businesses worldwide: how should companies balance investment in technology with investment in people?
As AI becomes a bigger part of corporate strategy, more organisations may be forced to make similar choices.
For now, Teradata's decision offers a glimpse into how the AI boom is reshaping workplace priorities, and how employees may increasingly feel its impact beyond the office computer screen.
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