Israel's High-Tech Sector Remains Stable Despite Layoffs Concentrated in Software Firms

A recent survey by the Israel Innovation Authority and Tzaviran, covering 210 high-tech companies employing around 130,000 workers, found that employment in the sector remained relatively stable during the first half of 2026. Companies hired an average of 8% new employees while layoffs stood at 2.8%, and 4.3% of employees left voluntarily. Overall, these figures indicate only a slight change in total employment.

Macro data supports this stability, with about 15,000 job seekers in tech professions in February 2026, alongside approximately 18,000 open positions. The Central Bureau of Statistics reported a 7% increase in high-tech employment in Q1 2026, reaching roughly 424,000 workers. However, the labor market is shifting in demand, with layoffs concentrated mainly in software companies and medium-sized firms. Software firms experienced a 6.6% layoff rate, more than double the sector average, while hardware and pharma/medical companies had much lower rates of 1.1% and 2.7%, respectively. Medium-sized companies (50-200 employees) saw the highest layoff rate at 8.7%, accounting for nearly half of broad layoffs.

Looking ahead, 37% of high-tech firms expect hiring to slow in the second half of 2026, up from 23% in the previous survey. Planned hiring rates dropped from 7.2% to 5.9%, and planned layoffs increased from 4.1% to 6.4%. Artificial intelligence (AI) is not yet the main cause of layoffs, cited by only 7% of companies, but it is increasingly influencing hiring decisions, with 10% of firms reducing recruitment due to AI compared to 3% at the end of 2025. Half of the companies planning layoffs report AI affecting their decisions, up from 29% previously.

Dror Bein of the Innovation Authority emphasized that this transformation highlights the importance of deep innovation and leadership in breakthrough technologies. He stated, "Alongside the challenges, this change opens new opportunities for entrepreneurs and companies, so we must continue investing in R&D, human capital, and deep tech to ensure Israel remains a global innovation leader in the AI era." Bein concluded that the 2026 story is not about the number of layoffs but about the evolving skills the market demands.