A new survey by the Israel Innovation Authority and Zviran, conducted in the second half of June among 210 companies employing approximately 130,000 people, shows Israel’s technology sector is fragmenting. Software companies are cutting jobs and slowing hiring amid rapid AI adoption, while hardware, chip and deep-tech companies continue to expand. During the first half of the year, surveyed companies hired an average of 8% of their workforce, while the layoff rate was 2.8% and 4.3% of employees left voluntarily, indicating a stable overall workforce. Some 18,000 vacancies were recorded in the technology sector, compared with approximately 15,000 job seekers, and high-tech employment increased by about 7% in the first quarter of 2026, according to the Central Bureau of Statistics. The software layoff rate jumped to 6.6%, more than twice the industry average, attributed mainly to the AI revolution and intensifying competition. Hardware companies recorded a layoff rate of just 1.1%, while medical and pharmaceutical industries recorded 2.7%. The divergence reflects global demand for computing infrastructure, chips and advanced hardware for AI systems. Medium-sized companies employing between 50 and 200 people had the highest layoff rate at 8.7%, more than three times the industry average.