Israel Data Center Market SIZE & SHARE ANALYSIS - GROWTH TRENDS & FORECASTS UP TO 2030

Israel Data Center Market Analysis

The Israel Data Center Market size is estimated at 286.1 MW in 2025, and is expected to reach 376 MW by 2030, growing at a CAGR of 5.62%. Further, the market is expected to generate colocation revenue of USD 219 Million in 2025 and is projected to reach USD 354.1 Million by 2030, growing at a CAGR of 10.08% during the forecast period (2025-2030).

Israel's data center market is experiencing robust growth driven by its thriving startup ecosystem and technological innovation hub status. The country hosts approximately 625,267 businesses, with an impressive 99.5% being SMEs, creating a strong foundation for digital infrastructure demand. This entrepreneurial landscape has particularly flourished in the cloud data center sector, with Israel boasting 8.4 cloud computing startups per million people, significantly outpacing other developed nations like the United States. The government's active role in promoting technological advancement is evident through initiatives like the Israel Innovation Authority's support programs, which operate with an annual budget of approximately USD 400 million.

The market is witnessing significant infrastructure developments and strategic investments from global technology leaders. In March 2023, Amazon made a notable investment in Israeli supply chain analytics startup Flymingo, demonstrating continued confidence in the region's technological capabilities. Digital Realty's planned campus development in Tel Aviv and Google's activation of its local cloud region for Israel in October 2022 further underscore the market's strategic importance. These developments are complemented by robust fiber connectivity infrastructure, with over 1.5 million families now having access to fiber optic networks.

The data center infrastructure in Israel is characterized by high-tier facilities and advanced technological capabilities. Tier 3 facilities dominate the market, accounting for 75.4 MW of data center capacity, while the absence of Tier 1 and 2 facilities reflects the market's advanced maturity and focus on high-reliability infrastructure. The market has achieved significant progress in infrastructure deployment, with 95% of Israel's households having their deployment commitments met, creating a strong foundation for future data center expansions.

The market is experiencing a transformation in its service delivery model, particularly in the financial and government sectors. The implementation of advanced technologies like blockchain for government bonds and the growing adoption of cloud-based services by public entities demonstrate the market's evolution. Major cloud service providers are establishing dedicated facilities to serve government ministries and public entities, indicating a shift towards more sophisticated and secure data center solutions. This transformation is supported by strategic partnerships between local and international players, creating a robust ecosystem for future data center growth.

Israel Data Center Market Trends

Growing number of smartphone users, digitalization of different services, and increasing digital payments across the country boosts the market growth

• The total data traffic per smartphone was 5.2 GB in 2022. It is expected to reach 32 GB in 2029, registering a CAGR of 29.64% during the forecast period.
• Several end users witnessed an increase in mobile phones, which contributed to data traffic. For instance, the BFSI sector observed companies like Apple Pay and Google Pay entering the market in 2021. About two-thirds of Israel's terminals are capable of accepting wireless payments through such modes.
• The growth can be observed through the significant subscriber penetration of 74% in 2021, which is expected to reach 78% by 2025. This indicates the user inclination and network density in Israel.
• Similarly, the digitalization of different services would generate increased demands for data processing as data traffic increases. The e-commerce sector accounts for a penetration rate of 47% in Israel, which is expected to grow by 25% by 2025.

Increasing number of digital consumers boost the data center demand in country

• The total number of smartphone users was 7.1 million in 2022.
• It is expected to reach 8.4 million by 2029, registering a CAGR of 2.31% during the forecast period.
• About 71% of the Israeli population had mobile internet subscriptions in 2021. However, 28% did not use it, and 1% did not have access to a subscription.
• Smartphone usage in Israel was evident, with a prominent smartphone adoption rate of 84% in 2021, compared to a projected rate of 87% by 2025. This signifies growth potential, requiring an efficient network to facilitate device and service adoption.
• With a strong number of 455 million mobile subscribers expected in 2025 in Israel, the number of smartphone users would force telecom service providers to opt for better and faster data center facilities to cope with the increasing performance demand in Israel.

OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT

Segment Analysis: By Hotspot

Rest of Israel Segment in Israel Data Center Market

The Rest of Israel segment dominates the Israel data center market, accounting for approximately 63% of the total IT load capacity in 2024. This segment encompasses multiple Israeli cities that are making significant financial contributions to the data center industry, driven by high social media and internet usage patterns. The segment's growth is supported by improved inland connectivity and the introduction of 5G services across various locations. The segment demonstrates robust growth potential with a projected growth rate of nearly 11% from 2024 to 2029, making it the fastest-growing segment in the market. The Israeli government's investment in various 5G projects across these regions, coupled with the development of smart infrastructure initiatives, continues to drive the expansion of data center facilities in these areas.

Tel Aviv Segment in Israel Data Center Market

Tel Aviv represents a significant hub in Israel's data center market, holding approximately 37% of the market share in 2024. The region's prominence is attributed to its status as a major technological hub, with its strategic proximity to crucial government facilities, power resources, and technological advancements required for empowering and operating data centers. The segment benefits from the presence of numerous client companies in and around Tel Aviv, leveraging faster internet connectivity through the facilities. The area's growth is further supported by efficient disaster management services, which are essential for the uninterrupted functionality of data center facilities. Additionally, Tel Aviv's position is strengthened by its role in hosting several homegrown startups and international cloud service providers.

Segment Analysis: By Data Center Size

Large Segment in Israel Data Center Market

The large data center segment dominates the Israeli data center market, accounting for approximately 67% of the total IT load capacity in 2024. With eight data center facilities identified as large data centers, this segment commands a significant presence in the market with a combined IT load capacity of around 116 MW. These facilities are strategically concentrated in various regions of Israel, with the rest of Israel holding about 69% market share, followed by the Tel Aviv region at 12%. The segment's dominance is further strengthened by key players like MedOne, which maintains a substantial market presence through its facilities distributed across the country.

Massive Segment in Israel Data Center Market

The massive segment is emerging as the most dynamic growth sector in the Israeli data center market, projected to grow at approximately 12% CAGR from 2024 to 2029. This remarkable growth trajectory is driven by increasing technological advancement and ever-growing data transfer requirements. Digital Realty's planned campus development in Tel Aviv, through a joint venture with Mivne Real Estate, exemplifies this growth with plans for a 20 MW facility in Petah Tikvah. The segment's expansion is further supported by the rising demand for larger facilities to accommodate cloud computing and advanced technological requirements in Israel.

Remaining Segments in Data Center Size Market

The medium and small segments, along with the emerging mega segment, complete the Israeli data center size market landscape. The medium segment maintains a significant presence with nine facilities distributed between Tel Aviv and the rest of Israel, all maintaining Tier 3 certification standards. The small segment continues to serve specific niche requirements, particularly in Tel Aviv, while the mega segment is positioned to emerge as a significant player with planned facilities designed to cater to the increasing demand for hyperscale facilities. These segments collectively provide a diverse range of options to meet varying customer requirements and technological needs in the Israeli market.

Segment Analysis: By Tier Type

Tier 4 Segment in Israel Data Center Market

Tier 4 data centers have emerged as the dominant segment in Israel's data center market, commanding approximately 51% of the total IT load capacity in 2024. These facilities demonstrate superior reliability and performance capabilities, with major players like MedOne and 3Samnet operating Tier 4 certified facilities across various hotspots in the country. The segment's prominence is driven by the increasing demand for maximum uptime and fault-tolerant infrastructure, particularly from sectors requiring mission-critical operations. These facilities offer advanced security measures, redundant power systems, and cooling infrastructure, making them particularly attractive for enterprises requiring the highest levels of data center reliability and performance.

Tier 3 Segment in Israel Data Center Market

The Tier 3 segment is experiencing remarkable growth in the Israeli data center market, with projections indicating an expansion rate of approximately 12% during 2024-2029. This growth is primarily driven by the increasing demand for higher redundancy rates and the segment's ability to offer a balanced combination of reliability and cost-effectiveness. Major service providers are actively introducing more Tier 3 facilities to meet the growing demand from various sectors, including cloud service providers, telecommunications companies, and government agencies. The segment's growth is further supported by its ability to maintain concurrent maintainability while offering substantial uptime guarantees, making it an attractive option for businesses requiring robust data center infrastructure without the premium costs associated with Tier 4 facilities.

Segment Analysis: By Absorption

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We provide a complimentary and exhaustive set of data points on the country and regional level metrics that present the fundamental structure of the industry. Presented in the form of 50+ free charts, the sections cover difficult to find data on various countries on smartphone users, data traffic per smartphone, mobile and broadband data speed, fiber connectivity network, and submarine cables.