AI layoffs mount amid software sector bloodbath

“AI layoffs” have become a familiar phrase at tech companies in the past two years. More and more companies, especially in the software sector, are downsizing workforces, citing the development of AI as the reason. These cuts can sometimes reduce a significant proportion of the company’s employees in a single round of layoffs.

AI layoffs can arise for several reasons, or a combination of these reasons. The development of AI in recent years has led to situations where human work is replaced by AI, or AI can do the same job faster or at a lower cost. In other instances, companies may reduce their human capital so that they can free up resources for the necessary investment in AI.

There are also times when the development of AI threatens the business model of companies, and those companies have no choice but to cut back and change if they want to survive in the new world. This story has been given the frightening name “SaaSpocalypse”, an apocalypse of SaaS companies, which provide enterprise software as a subscription in the cloud.

Shares in the sector have fallen by tens of percent in recent months, amid capital market concerns that AI will damage, or even make redundant, the solutions companies offer and the entire SaaS business model.

In addition, it cannot be denied that there may also be cases in which it is convenient for companies that are carrying out an aggressive round of layoffs to blame AI for the cuts they would probably have carried out anyway.

Reaching Israelis too

AI layoffs are of course also affecting Israeli software companies and causing an upheaval. The most recent example is monday.com (Nasdaq: MNDY), which announced on Wednesday the layoffs of 620 employees, which is about 20% of its workforce.

As of the end of 2025, Monday had 1,729 employees in Israel, about 55% of its employees. monday.com, which provides an AI-based platform for managing work tasks, is traded on Nasdaq at a market cap of $3.1 billion, after its stock fell by about 75% in the past year.

The company, led by co-founders Roy Mann and Eran Zinman, has made what it describes as the most significant change since the company was founded. monday.com explained that the change transforms the company from a work management platform to one that also does the work using AI agents that are integrated into it, allowing humans and agents to work together. The change also led to a new pricing model, in which customers will buy credits from Monday.com and use them to consume features it offers.

Meanwhile, the stock market has not yet been convinced, and the stock is trading at levels close to its lowest.

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Someone who has already experienced a crisis that led to AI layoffs is Avishai Abrahami, founder and CEO of Wix, who also serves on the board of monday.com and was one of its first investors..

Wix allows users to build and manage websites. Last year, as part of the understanding that change was needed due to the rise of AI, the company made the very successful acquisition of Base44, which is involved in Vibe Coding, allowing users to create digital works using natural language, without the need for code.

Base44 has become the engine of Wix’s growth, with annual recurring revenue (ARR) that has jumped from a few million dollars to about $150 million in a year. With Wix too, investors have not been convinced, and the company’s stock has fallen 67% in the past year (although it has recovered slightly from the recent low), with the main concern being that AI would harm the company’s traditional activities and make them redundant.

Abrahami recently told the US podcast 20VC, “I would be happy to say that in three years our team will consist 1,000 employees at Base44, 1,000 employees at Wix, and all the rest will be AI agents, but I’m not so sure that’s possible. We all give too much credit to AI and what it can do.”

Wix cut 20% of its employees this year, about 1,000, layoffs that were explained both by the development of AI, which requires it to become a leaner and faster company, and also by the strengthening of the shekel.

The layoffs at Fiverr

An Israeli company that has made significant changes and cuts in response to the development of AI almost a year ago is Fiverr (NYSE: FVRR). The company, led by founder CEO Micha Kaufman, announced last September that it would lay off 250 employees, about a third of Fiverr’s workforce.

At the time Kaufman explained, “The speed at which technology is changing, and the possibilities it provides, are amazing and require new thinking and greater speed to stay ahead… We can and should dream bigger, and build Fiverr faster as an AI-focused infrastructure.”

To this end, it was decided to make the company leaner, with fewer management layers, or as Kaufman defined it, “return to a startup state.” Investors in Fiverr also seem to prefer to wait for the picture to become clearer, and the stock has fallen by about 58% in the past year.

These Israeli examples are of course part of a much broader picture. According to “TechCrunch,” in the first half of 2026 alone, the number of layoffs worldwide reached 165,000. Oracle, for example, laid off 13% of its employees (21,000) and Microsoft announced 4,800 layoffs, after last year it had already explained the layoff of thousands of employees as a need to cut expenses, to adapt to rapid technological change and the large investments required for AI.

Software company Salesforce laid off 4,000 employees in customer support roles last year, and the CEO explained that following the development of AI, it needed fewer employees.

Hiring employees again

About a month ago, software company Intuit laid off 3,000 employees, which constitutes 17% of its workforce, due to a business focus on AI-based products. However, the company’s CEO Sasan Goodarzi told “CNBC,” “This has nothing to do with AI. The goal is to become more effective.” This may be part of a shift in tone on AI layoffs. Recent articles are beginning to question the moves that have been made, for example, a CNBC article said that companies are starting to reconsider focusing on AI at the expense of employees.

A Ford VP said in the article that the company is rehiring engineers: “AI is a fantastic tool, but only as good as the information you train it on.” An IBM executive said there that if entry-level employees are not hired, “What will happen in 3-5 years? The well will run dry.”

“Forbes” also found that some companies are starting to rehire human workers. “The company first announces that it is going to use AI to do the work. The number of employees is reduced. Then 6-12 months later it turns out that the AI has only successfully performed 60% of the tasks, and the company rehires the people,” it said.

It’s hard to say there’s a change in trend, but it seems that skepticism remains, both as companies reduce employees and as they invest in AI, and in the capital market at least, investors are waiting for more clarity.

Published by Globes, Israel business news – en.globes.co.il – on July 23, 2026.

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