Despite the spate of reports of layoffs by technology companies, the number of people employed in the Israeli technology industry remained almost unchanged in the first half of 2026, according to a survey by the Israel Innovation Authority and Zviran Compensation and Benefits Solutions. Behind the general stability, however, lurks a change in the employment profile. Software companies are shedding employees at a high rate, while hardware companies continue to expand. At this stage, the impact of artificial intelligence is mainly on the new hire stage, and is less evident in layoffs, which have already been carried out.
The survey covers 210 companies employing some 130,000 people altogether. It focuses on companies employing more than 50 workers, and so does not necessarily reflect what is happening at small startups.
According to the survey, in the first half of this year the companies recruited workers amounting to an average of 8% of their workforces. The percentage of employees laid of was 2.8%, while another 4.3% left of their own accord. Putting all these movements together, the total tech workforce remains similar in size to what it was at the beginning of the year.
This picture is partly in line with other data on the labor market. According to the Employment Service, there are about 15,000 people looking for work in technological professions, and there are about 18,000 job vacancies in those professions. Central Bureau of Statistics figures indicate 7% growth in the number of people employed in high tech in the first quarter of 2026.
Nevertheless, the figures do not necessarily mean that those looking for work can fill the vacancies. Some of the new jobs require experience, training, and expertise different from the qualifications of the workers who have left other companies. So it may be that the overall number of workers in the industry will remain stable, while workers in certain areas will have difficulty in finding new jobs.
Streamlining doesn’t always lead to layoffs
At software companies, layoffs amounted to 6.6% of the workforce in the first half of the year, more than double the general industry average. At hardware companies, the rate was just 1.1%. At pharmaceuticals and medical devices companies it was 2.7%.
The gap reflects the impact of AI on business models and manpower needs. Software companies can use AI to accelerate coding, checks, service, and other development processes. They have to deal with competitors that can develop products with smaller teams.
At hardware companies, the picture is different. The growth in demand for processors, computing infrastructure, and systems based on deep tech, boosts demand for people with special expertise. As a result, the greater efficiency facilitated by AI doesn’t necessarily translate into downsizing, and is sometimes even accompanied by expansion in activity.
Company size also affects the chances of layoffs. The highest rate of layoffs is at companies employing between 50 and 200 people, reaching 8.7%, more than triple the industry average. Companies in this group represented almost half of the companies that carried out extensive layoffs.
The rate of layoffs was higher among Israeli growth companies with international activity than at development centers of multinationals. According to the survey, the shekel-dollar exchange rate was one of the reasons for this. 17.6% of the companies that carried out broad layoffs cited this as a reason for the move, as did 28% of the companies that cut back on recruitment.
AI depresses hiring
According to the survey, companies are being more cautious in their approach to the second half of the year. More than a third of them expect a decline in recruitment, almost double the proportion measured in the previous survey. The rate of planned recruitment fell from 7.2% of the workforce in the first half to 5.9% for the second.
Among companies expecting to make extensive layoffs, the proportion of their workers that they plan to dismiss rose from 4.1% in the previous survey to 6.4% in the current survey. These are the companies’ reported intentions, not a forecast of the actual number of layoffs.
Half of the companies planning layoffs report that AI had some impact on their decisions, which compares with 29% in the previous survey. Only 7%, however, cited the technology as the main reason for downsizing, compared with 5% in the past. Greater business efficiency remains the chief reason for layoffs.
In general, the survey does not indicate wholesale and immediate replacement of workers by AI at this stage. It does show that companies are reviewing their manpower needs, slowing recruitment, and changing job descriptions and the qualification required to fill them. Behind the stability in total numbers, a more fragmented labor market is developing in which the area of activity and professional specialization increasingly affect the chances of being employed.
Published by Globes, Israel business news - en.globes.co.il - on August 11, 2026.
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