The definitive annual report on Israel's data center market: investment flows, capacity additions, hyperscaler activity, regulatory developments, and the outlook for 2027.
Israel's data center market entered 2026 as one of the fastest-growing in the EMEA region, with total planned investment exceeding $3.5 billion through 2028. This report synthesises market intelligence from operator announcements, regulatory filings, and primary research to provide the most comprehensive picture of the Israeli data center landscape available.
Market Size and Growth
The Israeli data center market generated approximately $1.2 billion in revenue in 2025, representing 18% year-on-year growth. This growth rate significantly outpaces the global average of 12%, driven by three structural factors: hyperscaler regional expansion, AI infrastructure investment, and government digital transformation mandates.
Hyperscaler Activity
All three major hyperscalers are expanding their Israeli footprint in 2026. Microsoft Azure's Israel Central region, launched in 2023, is expanding capacity with a second availability zone. Google Cloud's Tel Aviv region is adding GPU-optimised instances to serve the Israeli AI market. AWS continues to serve Israeli customers from its Frankfurt and Bahrain regions while evaluating a dedicated Israeli region.
This hyperscaler activity creates significant demand for carrier-neutral colocation — hyperscalers typically co-locate edge infrastructure and require direct cross-connects to local providers.
Capacity Additions
MedOne's announced expansion from 25,000 sqm to 70,000 sqm of capacity represents the largest single data center investment in Israeli history. The expansion, expected to complete in phases through 2028, will add approximately 160 MW of additional IT load capacity — enough to power the AI training requirements of Israel's entire startup ecosystem.
Regulatory Landscape
The Israeli Privacy Protection Authority's updated regulations, effective January 2026, impose stricter data localisation requirements for healthcare, financial services, and government data. This is accelerating migration from foreign cloud providers to locally certified facilities, benefiting Israeli colocation operators.
Investment Outlook 2027
We project 15–20% market growth in 2027, driven by continued AI infrastructure investment, government cloud migration mandates, and the maturation of Israel's submarine cable connectivity infrastructure. The market is consolidating around tier-1 operators with the capital and certifications to meet enterprise and hyperscaler requirements.
