Dramatic split: The new map of upheavals in Israeli tech
Tech employment remained stable and the sector is not collapsing but reorganizing: While software companies recorded 6.6% layoffs, hardware stood at just 1.1%.
In June 2026, a new survey conducted by the Innovation Authority and Zviran revealed a complex landscape in Israel's tech sector, challenging the perception of widespread layoffs. While the number of tech employees remained stable at around 424,000, the survey highlighted a significant division between software and hardware companies.
Software firms experienced a higher layoff rate of 6.6%, almost double the industry average, while hardware companies saw a much lower layoff rate of 1.1%. This contrast was also evident in the medical and pharmaceutical sectors, where the layoff rate stood at 2.7%. The survey, which covered 210 tech companies employing approximately 130,000 workers, indicated that despite an overall employment level remaining constant, a profound transformation was underway.
The survey pointed to two distinct tracks within the tech sector: software companies were rapidly streamlining their operations in response to the artificial intelligence (AI) revolution, while hardware companies continued to expand and hire workers. The demand for chips, computing infrastructure, and deep tech solutions was driving growth in the hardware sector.
Medium-sized companies, defined as those with 50 to 200 employees, faced the most significant layoff pressures, with a layoff rate of 8.7%, nearly triple the industry average. This group accounted for nearly half of the firms that carried out broad layoffs. The Innovation Authority attributed this to the heightened sensitivity of smaller companies to cash flow and business pressures, including exchange rate fluctuations and rising employment costs in Israel.
The growing influence of AI was another crucial factor. About 30% of tech companies reported broad integration of AI into their products, a substantial increase from 21% at the end of 2025. However, actual hiring cuts due to AI integration accounted for only 10% of all tech companies, tripling the figure from the previous year. Companies that scaled back hiring due to AI cited exchange rates as a primary reason in 28% of cases.
Despite the layoffs in the software sector, the overall forecast for the second half of 2026 suggested a continuation of stagnation, with 37% of tech companies expecting reduced hiring volumes. Among those planning company-wide layoffs, the planned layoff rate increased from 4.1% to 6.4%. Dror Bin, CEO of the Innovation Authority, emphasized that Israeli tech was undergoing a deep structural change rather than a period of decline.
The sector was experiencing a shift in skills demand, with a focus on emerging technologies and high-growth areas such as chips, computing infrastructure, and defense technologies.
Written by urgent.news from Jerusalem Post Tech & Start-Ups's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
