Artificial intelligence is changing more than the way companies operate. For some employees, it is beginning to affect what lands in their paychecks.

As businesses pour billions into AI initiatives, a growing number are looking for ways to fund those investments. In some cases, that means scaling back compensation growth, pausing benefits, or redirecting money that would have otherwise gone to workers.

One major software company has now made that trade-off clear to employees.

Teradata Redirects Raise Budget Toward AI

Global cloud software company Teradata informed its workforce earlier this year that annual salary increases would not be part of the company’s compensation plans for 2026.

According to an internal memo sent by CEO Steve McMillan, the company intends to channel those resources into expanding its AI capabilities and strengthening its expertise in the rapidly evolving technology sector.

The memo stated that Teradata’s primary goal for 2026 is to “win in the market with AI.”

McMillan also told employees: “We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments.”

The company, which employs roughly 5,100 people, declined to discuss the specific compensation decision. However, a spokesperson confirmed that Teradata continues investing heavily in AI-related products and services.

Employees in countries where salary adjustments are not legally required will be affected by the policy. Performance bonuses and equity awards remain available under the compensation structure.

Several longtime employees indicated that annual raises had historically fallen between 2% and 4%, though those increases were never guaranteed.

Another Tech Firm Makes A Similar Move

Teradata is not alone.

Technology services company TTEC recently informed employees that it would suspend matching contributions to 401(k) retirement plans for U.S. workers through the end of 2026.

Internal communications indicated that the savings would help fund AI-related tools, training programs, and technology development as the company pursues its long-term artificial intelligence strategy.

The move reflects a broader trend emerging across parts of the technology sector, where executives increasingly view AI spending as a business necessity rather than an optional investment.

Experts See A New Corporate Message Emerging

Workplace strategist and author Jennifer Moss believes the directness of these announcements represents a notable change in corporate communication.

“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,” Moss said. “And what becomes sayable tends to become more doable.”

Her comments suggest that companies are becoming more comfortable openly connecting employee sacrifices with technology investments.

Why Companies Are Spending More On AI

Across nearly every industry, organizations are increasing budgets for artificial intelligence projects.

A recent survey conducted by RBC Capital Markets found that 90% of IT professionals questioned expect their companies to increase AI spending during 2026.

The costs can vary dramatically. Smaller pilot programs may require only modest investments, while enterprise-wide AI initiatives can cost millions of dollars.

At the same time, many businesses continue dealing with economic pressures that include inflation, tariff uncertainty, and ongoing supply-chain challenges.

Both Teradata and TTEC have faced revenue declines in recent years, adding further pressure to balance spending priorities while remaining competitive.

Cutting Compensation Is A Choice, Not A Requirement

Moss argues that businesses have multiple ways to finance AI investments without directly affecting employee compensation.

She pointed to alternatives such as debt financing, reducing discretionary spending, restructuring executive pay, pursuing acquisitions, spreading investments over longer periods, or temporarily accepting lower profit margins.

Even some of the world’s largest companies are exploring alternative funding methods. This week, Alphabet announced plans to sell $80 billion worth of stock to support AI infrastructure spending.

According to Moss, labor expenses often become the target because they represent one of the largest costs companies can directly control.

“The reason workforce compensation ends up being the source is that it’s the largest controllable expense line at most companies and the one with the least organized resistance,” said Moss.

She also noted that AI spending often represents a relatively small share of overall company revenue compared with total workforce costs.

Research from the Boston Consulting Group’s 2026 AI Radar survey found that companies expect AI spending to account for roughly 1.7% of revenue this year.

Workers May Question Their Long-Term Security

For some experts, the issue extends beyond dollars and cents.

Jan-Emmanuel De Neve, an economist and director of Oxford University’s Wellbeing Research Center, believes more organizations may make similar decisions as AI adoption accelerates.

He warned that the message employees receive may be very different from the one executives intend to send.

“When leaders openly cut human compensation to fund AI, they are trying to project decisive, tech-forward management. However, the actual message traveling to the workforce is that they do not have a secure future in the organization,” De Neve said.

As AI spending continues to rise, companies may face a delicate balancing act: investing in future technologies while maintaining employee trust and morale.