Teradata Freezes Raises to Fund AI Investments
The cloud software company told 5,100 employees their annual salary increases would be redirected to AI talent and technology spending.
Cloud software company Teradata has told its 5,100 employees they will not receive annual salary raises in 2026, redirecting that budget instead toward artificial intelligence investments, according to an internal memo obtained by Business Insider.
CEO Steve McMillan wrote in the January memo that Teradata's focus for 2026 is to "win in the market with AI," and that the company would increase investment in AI talent and expertise by reallocating funds previously designated for annual salary adjustments.
Two US-based Teradata employees with over a decade at the company told Business Insider they typically received annual raises of 2% to 4%, though increases were not guaranteed each year. The freeze applies to employees in countries where regulators do not mandate market-aligned salary adjustments. Workers may still receive performance-based bonuses and equity shares.
A Teradata spokesperson confirmed the company is actively investing in AI to innovate its products and services but declined to comment on the budget decision.
Why it matters
The move signals a rhetorical shift in how companies justify workforce compensation decisions. Rather than citing vague efficiency goals, executives are now explicitly naming AI investment as the reason for cutting employee benefits—a transparency that workplace strategist Jennifer Moss says "marks a real shift in what leaders are willing to say in public."
Teradata is the second company Business Insider has reported openly prioritizing AI spending over workforce investment. Technology services firm TTEC recently paused 401(k) matches for US employees through the end of 2026, citing the need to fund AI tools, training, and capabilities.
The broader trend
Across industries, companies are increasing AI budgets. An RBC Capital survey of 117 IT professionals found 90% planned to boost AI spending in 2026. Those investments range from tens of thousands of dollars for basic integrations to millions for enterprise-scale transformations.
Both Teradata and TTEC operate in technology services, where failure to adapt to AI is viewed as an existential threat. Both have also faced financial headwinds—Teradata's global revenue declined 5% in its latest financial year, while TTEC's fell 3.2%. Teradata's headcount has dropped over 21% since December 2023, a reduction of 1,400 employees.
Yet workplace experts argue that cutting worker compensation is a choice, not an inevitability. Companies can finance AI transformations through debt, reallocating non-essential spending, adjusting executive pay, or accepting lower margins temporarily. Alphabet, for example, announced plans this week to sell $80 billion in stock to fund AI infrastructure.
Employee impact
Jennifer Moss notes that workforce compensation becomes the funding source because "it's the largest controllable expense line at most companies and the one with the least organized resistance." According to BCG's 2026 AI Radar survey of 2,360 global companies, businesses expect to spend only about 1.7% of revenue on AI in 2026—relatively small compared to total compensation expenses.
Jan-Emmanuel De Neve, director of Oxford University's Wellbeing Research Center, warned that such trade-offs reflect "short-term mindset" and send employees a message that "they do not have a secure future in the organization."
Employment attorney Ellen Raim, who has 30 years of corporate HR leadership experience, said companies risk undermining trust at the very moment they need employees to embrace new AI tools and identify where the technology can meaningfully improve operations.
The details were first reported by Business Insider's Polly Thompson.
This is an original analysis by the Omega editorial team. Source reporting: AI Watch.
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