The wave of layoffs in Israel’s technology sector is gathering pace, driven by two main forces: the strength of the shekel against the US dollar, and the rapid introduction of artificial intelligence tools into workplaces. Data put together by "Globes" show that, in May alone, nearly 6,000 people lost their jobs in Israeli technology companies (in Israel and the US), the main blows being the layoffs of some 3,000 employees at Amdocs and 1,000 at Wix. So far this year, Israel’s technology industry has shed about 8,500 people. This number represents some 2% of those employed in the industry, although it is presumed that about half of those laid off were actually employed overseas.

At the moment, June is looking calmer, with just 600 layoffs, but the assessment in the industry is that the downsizing trend is liable to worsen towards the end of the month, when we reach the end of the first half year. Many companies, especially listed companies and unicorns (privately-held companies worth over $1 billion), are likely to carry out massive streamlining programs in order to begin the second half with a slimmer cost structure.

If the layoffs continue at a similar pace, or even accelerate in accordance with the forecast, the impact on the Israeli industry could be tougher. According to the Central Bureau of Statistics, about 390,000 people were employed in the industry at the end of March. In the horror scenario in which the rate of layoffs stays at thousands a month, the industry is liable to part from 10% of its employees by December.

If the layoffs continue at the current rate, there could be several surprising effects. "The multi-nationals’ development centers have a positive impact on GDP, and mass layoffs at them will lower the amount of tax they pay to the state, since the tax is calculated as a percentage of employee salaries," a prominent economist who talked to "Globes" said. "Further shrinkage of Israel’s technology sector will certainly harm its surrounding support sectors - accountants, lawyers, investment funds - and if that happens companies will start to leave."

At the same time, he says, it’s also possible to think of positive trends. "The introduction of AI into enterprises will reduce costs and raise profitability and productivity, and so GDP shouldn’t be affected very badly. The people who have been laid off will find work in other sectors, such as industry or banking, or else they will found new startups."

The Bank of Israel is readying for any scenario, including extensive layoffs, but it says reassuringly that the numbers don’t point that way at present. Dr. Adi Brender, head of the Bank of Israel Research Department, says, "We have seen many people lose their jobs, but at the moment we’re not seeing that in the macro figures. Unemployment among people with first degrees, not necessary technological, remains very low, and in fact many of those laid off are absorbed in new workplaces."

The layoffs come on three fronts of Israel’s technology sector. The first is development centers of international companies such as Meta and Intuit. They are cancelling projects, eliminating business units, or transferring jobs to India because Israeli workers have become expensive. ZoomInfo, Shutterfly, and Remitly have shut down their development centers in Israel. Meanwhile unicorns such as Artlist and Lightricks, and Israeli companies listed on Wall Street such as Wix, Taboola, Amdocs, and Playtika have had to realign because of the AI revolution, and even more so after the decline in the shekel-dollar exchange rate shrank their profits by 20%.

Among startups, some small companies such as SQream and Sight Diagnostics have shut down altogether, while others have found that the money they raised from investors last year has shrunk in line with the shekel-dollar rate, and have had to adjust their budgets.

A report released by the Israel Innovation Authority three weeks ago outlines several positive trends, such as a rise in the number of jobs in 2024-2025 and a rise in the Israeli technology sector’s product, alongside worrying phenomena such as a decline in the number of new companies founded in Israel, an increase in the number of employees in the US at the expense of Israel, and a growing trend of technology workers relocating overseas. Innovation Authority CEO Dror Bin told "Globes" that in his view the layoff trend would only continue. "The sharp change in the exchange rate and the introduction of AI obliges everyone to downsize. I estimate that the layoffs will continue even if the shekel-dollar exchange rate rises."

Slow exit from the Covid bubble

Taking a macro-economic view, the layoffs are the new normal and companies will have to adapt to the new era. While workers report a 50-100% increase in output thanks to adoption of AI tools, CEOs make their calculations and cut the workforce on the assumption that those who remain will be able to do more with less.

Miriam Shtilman-Lavsovski, a partner in venture capital firm TAL Ventures, believes that the layoffs we have seen so far are just the start of a trend, and that AI and the shekel-dollar exchange rate are not the only causes. "Some of the phenomenon we are seeing now is attributable to the Covid bubble which has yet to burst. The bursting of the dot.com bubble led to massive layoffs and many company closures overnight, something that we didn’t see in the latest crisis. Companies are dying slowly and shrinking slowly, and that’s a symptom of a slow exit from the bubble that formed here in 2021 and 2022," she says.

In her view, further extensive layoffs are to be expected in software areas such as fintech, advertising, gaming, and cybersecurity, and she sees the proportion of the Israeli workforce employed in technology returning to where it was more than a decade ago. "In 2015, 8.7% of the workforce in Israel was employed in high tech, which compares with 11.4% today. We’ll be doing well if we go back to that position."

Shtilman-Lavsovski explains that two technological changes took place at the same time as the bursting of the dot.com bubble: the beginning of the online age, and the switch from development based on the complicated programming language C to object-oriented programming (C++). Like AI today, the new development language required a new set of skills, and led to a changing of the guard in the industry from veteran programmers in outmoded technologies to those who had managed to adapt to the new era. "The challenge will be what to do with all those laid off, how to reskill them. In the dot.com crisis, many of those who dropped out of the industry never returned to it," she says.

Average pay on the way down?

Dror Bin is wary of gauging the effect of the layoffs on the Israeli economy, but estimates that there may be a decline in the average salary in high tech because of the hiring of new employees at lower pay. "Last year was excellent for many startups and multinationals, and it can be assumed that they will absorb many of those laid off. It’s hard to estimate how many layoffs we will yet see. I’m not one of the pessimists who sees the industry shrinking by a third, but there’s no doubt that the recent period signals to managers that they must adapt cost structures to the new reality."

Together with the Ministry of Finance, the Innovation Authority is currently considering assisting startups by setting up a grants fund, along the lines of funds that were set up during the Covid pandemic and at the start of the Swords of Iron war. The Ministry of Finance is also considering benefits to employers in the form of lower National Insurance payments and tax benefits.

"We shan’t intervene economically in layoffs with the aim of stopping them," Bib says. "That would take tens of billions, and in any case it’s not the right thing to do. Companies are having to become more efficient for justifiable reasons, and employees laid off generally find work at other companies or in sectors other than high tech. That also has positive consequences. It introduces technologies and high productivity into other sectors."

Shiri Vax, CEO of placement company GotFriends, believes that the round of layoffs in the past few months was mainly a result of the implementation of AI tools at workplaces. She estimates that up to 10% of the workforce across the sector and in every role is in danger of being laid off unless people adopt AI in their jobs.

Nevertheless, Vax too is wary of talking about deep damage to the Israeli economy. "Many of those laid off are strong employees who find new work within a short time. For example, many of the people laid off who came to us from companies such as AI21 Labs or StarkWare have signed new contracts or hold several offers and need to choose. At the same time as the layoffs, many new jobs are opening up, and so the impact on unemployment is limited."

Vax derives optimism from the rise in the product of Israel’s technology sector, from a 30% jump in capital raised by startups, and by the peak in technology exports. The Central Bureau of Statistics reports a record average salary in high tech: NIS 38,500 monthly in March, while the average monthly salary of AI engineers has reached NIS 45,286. "There’s a considerable shortage of AI people and development managers who are capable of leading teams in the AI era, and so salaries continue to climb despite the layoffs," Vax says.

Published by Globes, Israel business news - en.globes.co.il - on June 22, 2026.

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