In 2025, high tech companies in Israel expanded despite its ongoing war against the Palestinians in Gaza, hitting $11.9 billion in revenueover the first three quarters, according to data from Startup Nation Central.
The figure represents a 13% increase from the same period in 2024, even as global economic pressures and regional instability weighed on investor confidence.
The proliferation in Israel military tech demand was led largely by cybersecurity firms, although the number of deals fell 22% to 569 deals. Mergers and acquisitions surged to a record $71 billion, with Alphabet’s $32 billion purchase of Wiz and Palo Alto Networks’ $25 billion acquisition of CyberArk dominating the landscape.
“The third quarter of 2025 highlighted a market in transition,” saidCEO of Startup Nation Central, Avi Hasson. “While funding slowed and investors became more selective, M&A activity reached historic highs.”
Israel’s high tech companies remain the country’s economic engine, accounting for 20% of GDP, 15% of jobs, and more than half of national exports.
Israel Cybersecurity Power
Israel vc firms from the cyber sector have long been central to the state’s economic and strategic power.
According to Visualizing Palestine’s “Pegasus Effect” report, leading AI companies Israel focus more on surveillance and cybersecurity per capita than any other nation, accounting for 31% of global cybersecurity investment in 2020 alone – three years before October 7.
Much of this stems from Israeli military’s elite cyber intelligence branch, Unit 8200.
For the startup nation 2025 was key in its growth, with the unit’s veterans have gone on to fund over 1,000 private tech firms, including major cybersecurity players.
Israel has created a close link between the military and private tech has created both economic strength and ethical controversy, according to experts.
The sector of defense tech Israel export both offensive and defensive cyber tools, from network software to spyware like Pegasus, developed by high tech companies in Israel. Pegasus, Israel’s most prized abhorrent creation can infect smartphones and extract private data without user interaction.
NSO Group’s Pegasus is Israel’s most prized possession during its war against Palestinians, Lebanese, Yeminis, and Syrians.
“Information gathered by Unit 8200 is often used for political persecution and to create divisions within Palestinian society,” said former intelligence reservists in public testimony.
The US Commerce Department blacklisted the Israel’s NSO Group in 2021, citing its use by foreign governments to target journalists, human rights defenders, and political dissidents.
Israel Counter Surveillance Companies
Exports from high tech companies in Israel, valued at $10 billion in 2020, are both lucrative and controversial.
Israel-based firms NSO Group, Candiru and Wintego, and the Intellexa Alliance, have supplied invasive spyware to several states — including Indonesia, Germany and Austria — although in some cases the exact contractual or legal ties remain undisclosed or contested.
Amnesty researchers described the technologies as “highly intrusive tools designed to be stealthy and leave little trace,” and they were concerned about illegal use and impunity. Intellexa, founded by a former Israeli military officer, has been sanctioned by the US Treasury for developing spyware that has been used against US officials and journalists.
Despite these controversies, Cellebrite digital forensics counter-surveillance and cybersecurity industries continue to be the focus of intense international investment.
Analysts assert that this paradox, whereby Israeli companies supply both shields and offensive tools, presents the state’s dual status as a hub of deadly innovation and as a focal point of the deadly geopolitics of cyber warfare when waging wars.
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