Israeli High-Tech Employment Remains Stable Amid Layoffs and AI Impact

Despite widespread reports of layoffs in Israeli tech companies, employment numbers in the sector remained nearly unchanged during the first half of 2026, according to a new survey by the Israel Innovation Authority and Tzaviron. The survey, covering 210 companies with about 130,000 employees, found that while software firms reduced staff at a higher rate, hardware companies continued to expand their workforce. The influence of artificial intelligence (AI) is mainly seen in reduced new hiring rather than in layoffs already executed.

The survey revealed that companies hired new employees equivalent to 8% of their workforce on average, while 2.8% were laid off and 4.3% left voluntarily, resulting in a stable overall employment level. Labor market data showed approximately 15,000 tech job seekers alongside 18,000 open positions, but mismatches in skills and experience may hinder some workers from filling vacancies. The survey focused on companies with over 50 employees, thus not fully reflecting trends in smaller startups.

A notable disparity emerged between sectors: software companies had a layoff rate of 6.6%, more than double the industry average, whereas hardware firms had only 1.1%. This difference likely reflects AI’s role in automating software development tasks, pressuring companies to operate with smaller teams, while hardware demand grows due to increased needs for chips and computing infrastructure. Mid-sized companies (50-200 employees) experienced the highest layoff rates at 8.7%, with currency exchange rates cited as a factor by 17.6% of companies conducting broad layoffs.

Looking ahead, over a third of companies expect reduced hiring in the second half of 2026, nearly double the rate from the previous survey. Planned hiring rates are projected to drop from 7.2% to 5.9%, while anticipated layoffs among companies planning cuts rose from 4.1% to 6.4%. AI adoption increased from 21% to 30% of companies, with those reducing hiring due to AI rising from 3% to 10%. However, only 7% cited AI as the main reason for workforce reductions, with business efficiency remaining the primary cause.

Dror Bin, CEO of the Israel Innovation Authority, emphasized that these trends indicate structural changes rather than an overall industry decline. The split between software and hardware sectors is reshaping employer demands for skills and roles. The survey suggests companies are reassessing workforce needs, slowing hiring, and adjusting job requirements, leading to a more segmented labor market where specialization increasingly affects employment prospects.