Israeli High-Tech is Growing – and Moving Abroad

31 May, 2026

The 2026 High-Tech Report warns of a decline in software developers in Israel, expanding operations overseas, and a growing concentration of management roles in the US

Israel’s high-tech sector returned to a growth trajectory in 2025, delivering one of the strongest years in its history. At the same time, however, the industry is showing early signs of structural changes that could shape its future, according to the Israel Innovation Authority’s 2026 State of High-Tech Report.

According to the report, Israel’s high-tech GDP grew by 8.2% in 2025, reaching NIS 352 billion. The sector’s share of national GDP rose to 18.3%, and high-tech accounted for roughly half of Israel’s overall economic growth during the year. High-tech exports reached a record $85 billion, representing 58% of the country’s total exports.

The capital market also saw a strong recovery. Israeli technology companies raised $14.6 billion in 2025, up 30% from 2024, while total exit value reached $84 billion, driven in part by major transactions involving Wiz, Armis, and CyberArk. Israel ranked fourth globally in startup funding and remained the leading startup hub outside the United States.

One of the report’s most notable findings is a shift in the industry’s growth drivers. While software companies led the sector throughout much of the past decade, the main engine of growth in 2025 was hardware, electronics, and advanced manufacturing. The hardware industry contributed approximately NIS 16 billion in additional output within a single year — an unusually sharp increase compared to recent years. The Innovation Authority links this trend to rising investment in deep-tech sectors, AI infrastructure, semiconductors, space technologies, and defense technology.

The report also points to early signs of artificial intelligence reshaping the labor market. For the first time in a decade, the number of R&D employees in Israel declined, falling by approximately 3,500 workers. At the same time, the number of product-related roles increased by roughly 15,000. The Authority suggests this may represent the beginning of a structural shift driven by AI-powered productivity gains in software development.

Despite the industry’s strong business performance, the report highlights a concerning trend: the gradual relocation of activity outside Israel. The share of employees working in Israel for Israeli high-tech companies fell from 69% in 2019 to just 62% by March 2026. Most of the growth occurred in the United States, not only in sales and marketing functions but also in R&D positions and senior management roles.

The Innovation Authority warns that the key challenge for the coming years will not only be maintaining Israel’s capacity for innovation, but ensuring that this innovation continues to generate jobs, economic value, and long-term growth within Israel itself.

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