In recent weeks, it seemed as though Israeli tech had entered a broad wave of layoffs, but a new survey by the Innovation Authority and Zviran points to a far more complex picture: The number of tech employees remained almost identical and companies continue to hire workers in significant numbers, but beneath the surface, a deep shift is unfolding. The tech sector is splitting into two different tracks: Software companies are streamlining rapidly in light of the artificial intelligence revolution, while hardware companies continue to expand and recruit workers.
The survey, conducted in the second half of June 2026 among 210 tech companies employing a combined total of roughly 130,000 workers, represents over 80% of tech employees. The data show that during the first half of the year, companies recruited an average of 8% of their total workforce, while the layoff rate stood at just 2.8%. At the same time, 4.3% of workers left their jobs voluntarily, meaning that overall, no significant change was recorded in the number of people employed in the sector.
These figures align with Central Bureau of Statistics data, which project a growth of about 7% in the number of tech employees in the first quarter of 2026 to approximately 424,000 workers. Alongside this, the Employment Service recorded about 15,000 job seekers in technology professions, compared to about 18,000 open positions registered with the CBS in the same month.
The split: Software vs. hardware
One of the most prominent findings in the survey is the deep gap between the sectors:
Software companies: The layoff rate in the first half of the year reached 6.6% – more than double the industry average.
Hardware companies: The layoff rate stood at just 1.1%.
Pharma and medical: The layoff rate stood at 2.7%.
While software companies are experiencing an impact on competitiveness, hardware companies are enjoying the fruits of streamlining and an increase in demand for their products due to the growing need for chips, computing infrastructure, and deep tech solutions.
A cyber warrior at a computer (credit: SHUTTERSTOCK)Who are the main ones affected?
The highest layoff rate was recorded in medium-sized companies (50 to 200 employees), where the layoff rate reached 8.7% – more than triple the industry average. These companies accounted for nearly half of the firms that carried out broad layoffs. The Innovation Authority explained that companies of this size may be more exposed to cash flow and business pressures, including exchange rate fluctuations and the rising cost of employment in Israel.
In addition, the layoff rate was higher in Israeli companies with sites abroad (3.8%) compared to local branches of foreign companies (2.8%). Among companies that carried out company-wide layoffs, 17.6% cited the exchange rate as a reason, and about 28% of companies that scaled back hiring cited this factor.
The AI revolution: Tripling hiring cutbacks
The impact of artificial intelligence is growing stronger, but at this stage it is expressed mainly in hiring decisions and less in direct layoffs:
Product integration: 30% of tech companies report broad integration of AI into their products, a 43% increase compared to the end of 2025 (21%).
Actual hiring cutbacks: About 10% of all tech companies reported scaling back hiring due to AI integration – triple the figure from the end of 2025 (3%).
Reason for actual layoffs: Streamlining due to AI integration was cited as a primary reason for company-wide layoffs by only 7% of companies (compared to 5% at the end of 2025), with general streamlining remaining the leading reason (28%).
Planning ahead: 50% of companies planning layoffs report that AI has some impact on their plans (compared to 29% in the previous survey), and 17% report a major impact.
Forecast for the second half of 2026
Company plans for the remainder of the year point to continued stagnation: Almost 37% of tech companies project that hiring volume in the second half of 2026 will be lower than in the first half (an increase from 23% in the previous survey). Alongside this, the planned hiring rate fell from 7.2% to 5.9%. Among companies planning company-wide layoffs, the planned layoff rate rose from 4.1% to 6.4%.
Dror Bin, CEO of the Innovation Authority (credit: HANNAH TAYEB)
Dror Bin, CEO of the Innovation Authority, described the situation: “The survey indicates that Israeli tech is not in a period of decline, but in the midst of a deep structural change. Despite the sense of uncertainty generated by the wave of layoffs, the data show that overall employment in the sector remains similar, but behind this number lies a more complex reality. We are seeing a clear split between software sectors, which are undergoing significant adjustments due to technological changes and AI integration, and deep tech fields – including chips, computing infrastructure, defense technologies, and so on – which continue to demonstrate high demand for workers and serve as significant growth engines.”
Bin added: “We are not seeing a tech sector that is weakening, but a tech sector that is changing rapidly: We already understand that the story of 2026 is not how many workers are laid off, but which skills the market is looking for.”
