Israeli Tech Sector Grows Amid Gaza Conflict

Post by : Monika

In 2025, Israel's high-tech industry has shown impressive growth, even as the country continues its two-year-long conflict with Hamas in Gaza. From January to September, Israeli tech companies raised $11.9 billion, marking a 13% increase compared to the same period in 2024. This growth is particularly notable given the challenging circumstances.

Funding and Investment Trends

While the number of funding deals decreased by 22% to 569, the total amount raised increased, indicating that investors are focusing on fewer but larger investments. Cybersecurity companies have been the primary beneficiaries, attracting significant funding due to the growing global demand for advanced security solutions.

The third quarter of 2025 saw Israeli tech firms raise $2.4 billion, a 9% increase from the same period in 2024. However, this was a 50% decrease from the second quarter, suggesting a slowdown in the number of deals. Despite this, the size of individual investments remained substantial, reflecting continued confidence in the sector.

Mergers and Acquisitions Surge

Mergers and acquisitions (M&A) in Israel's high-tech sector have reached a record $71 billion in 2025, nearly five times higher than in 2024. This surge was driven by two major deals: Alphabet's $32 billion acquisition of cybersecurity firm Wiz and Palo Alto Networks' $25 billion purchase of CyberArk. These transactions highlight the global interest in Israeli technology companies and their innovative solutions.

The significant increase in M&A activity suggests that investors are looking to acquire established companies with proven technologies, rather than taking risks on early-stage startups. This trend may indicate a shift towards consolidation in the industry.

Economic Significance of the Tech Sector

Israel's high-tech industry plays a crucial role in the national economy. It accounts for approximately 20% of the country's Gross Domestic Product (GDP), 15% of employment, and more than 50% of exports. The resilience and growth of this sector are vital for Israel's economic stability, especially during times of conflict.

Avi Hasson, CEO of Startup Nation Central, emphasized that while the number of funding deals has decreased, the size of individual investments has increased. This trend reflects investor confidence in mature companies that are ready for scaling. The strong performance of the tech sector also underscores the importance of innovation and technological advancement in driving economic growth.

Challenges and Opportunities

Despite the positive trends, the Israeli high-tech industry faces several challenges. The ongoing conflict in Gaza has led to a reduction in the workforce, as many individuals are called to serve in the military reserves. This has resulted in a shortage of skilled labor in certain areas of the tech sector.

Additionally, the global economic environment remains uncertain, with fluctuations in market conditions and investor sentiment. These factors may impact future funding and investment in the Israeli high-tech industry.

However, the challenges also present opportunities for innovation and growth. The demand for cybersecurity solutions continues to rise, driven by increasing concerns over data privacy and cyber threats. Israeli companies are well-positioned to capitalize on this demand, given their expertise and track record in developing advanced security technologies.

Israel's high-tech industry has demonstrated remarkable resilience and growth in 2025, despite the ongoing conflict in Gaza. The increase in funding and record M&A activity reflect investor confidence in the sector's potential. While challenges remain, the industry's strong performance underscores the importance of innovation and technological advancement in driving economic growth.

As the situation continues to evolve, it will be crucial for Israeli tech companies to adapt to changing market conditions and capitalize on emerging opportunities. By doing so, they can continue to contribute to the country's economic stability and global competitiveness.

Israel High-tech industry Cybersecurity