Nvidia’s Israeli networking business is booming, and so is its economic footprint
The company’s networking revenue reached $32.3 billion in just the first half of fiscal 2027, already surpassing the previous full-year total. Much of the technology behind the business traces back to Mellanox and Nvidia’s Israeli development centers.
In March 2019, chip giant Nvidia dropped a bombshell on the Israeli market when it announced the acquisition of Israeli company Mellanox for approximately $6.9 billion in cash. The deal was completed on April 27, 2020. Mellanox, which developed high-speed communications technologies for data centers, became one of Nvidia’s key strategic assets in data center infrastructure following the acquisition.
The acquisition was particularly significant for Israel. Mellanox was one of the country’s leading technology companies, and the operations built around it became a central part of Nvidia’s global research and development activities in networking and communications for data centers. Alongside the capabilities it acquired through Mellanox, Nvidia has significantly expanded its R&D operations in Israel in recent years.
Through fiscal 2026, Nvidia reported data center revenue in two main categories: Compute and Networking. Networking includes communication chips, switches, connectivity systems and high-speed communications technologies for data centers. A significant portion of Nvidia’s technology and R&D activity in this area is connected to its development centers in Israel, much of which traces its origins to Mellanox.
Nvidia’s networking business has grown rapidly in recent years. In fiscal 2024, the company reported $8.57 billion in networking revenue. That rose to $13.0 billion in fiscal 2025 and then jumped 140% to $31.38 billion in fiscal 2026, which ended in January 2026.
Beginning in the first quarter of fiscal 2027, Nvidia changed the way it reports its data center business, placing greater emphasis on customer categories. As a result, its main financial reports no longer provide the same clear breakdown between compute accelerators and chips on one side and networking products, switches and connectivity products on the other.
However, Nvidia continued to provide the previous breakdown during the first two quarters of fiscal 2027. In the first quarter, data center Compute revenue was $60.4 billion, while Networking revenue was $14.8 billion. During the earnings call following its second-quarter results, the company said Networking revenue had increased 18% from the first quarter to $17.5 billion.
That puts Networking revenue at $32.3 billion for the first half of fiscal 2027, already exceeding the full-year figure for fiscal 2026. If the current pace continues, Networking revenue could more than double in fiscal 2027 compared with the previous year.
We estimate that a significant portion of Nvidia’s connectivity business, potentially around 70%, relies on technologies originating from Mellanox and the company’s development centers in Israel. This is an estimate based on the concentration of Nvidia’s networking R&D activity in Israel and the technological heritage of Mellanox. Nvidia does not publish a breakdown of its networking revenue or development activity by country.
Based on this estimate, the contribution of Nvidia’s Israeli operations to the company’s revenue in calendar 2025 was approximately $20 billion, while the contribution could exceed $40 billion this year. These figures should not be confused with Israeli exports or the value added generated in Israel. Nvidia’s products are manufactured, assembled and packaged outside Israel, meaning the full value of sales generated by technologies developed in Israel is not recorded as Israeli exports.
The Central Bureau of Statistics publishes a category for “goods sold abroad and not crossing the country's borders” as part of the adjustments between foreign trade statistics and balance-of-payments definitions. The category covers more than Nvidia, and therefore its full value cannot be attributed to the company.
Nevertheless, the figures show an unusual development in recent years. Exports in this category rose from $5.834 billion in 2021 to $7.312 billion in 2022 and $9.781 billion in 2023. They declined moderately to $9.276 billion in 2024 before jumping to $16.122 billion in 2025.
The sharp increase coincided with an extraordinary rise in Nvidia’s networking sales. It is therefore possible that part of the increase in this category is related to the expansion of Nvidia’s business, although the public data do not allow the portion attributable to Nvidia to be isolated.
Given the growing scale of Nvidia’s activities in Israel, the Central Bureau of Statistics could clarify how this type of activity is reflected in Israel’s balance-of-payments and export statistics. At present, however, there is no public data that allows Nvidia’s contribution to this category to be separately identified.
Nvidia’s full fiscal 2026 annual report also shows that the company paid $1.287 billion in corporate tax in Israel. It is reasonable to assume that most or all of this payment was made during calendar 2025, although the annual report does not provide a precise payment date.
If the estimated revenue generated by Nvidia’s Israeli operations more than doubles in 2026, the company’s tax contribution in Israel could also increase substantially. However, tax payments do not necessarily rise in direct proportion to revenue, so any estimate of this year’s payment should be treated cautiously.
Israel at the forefront of the AI revolution
Nvidia has arguably become the international company with the greatest impact on Israel’s technology economy. Its growing presence places the country at the center of the AI revolution while also increasing Israel’s economic exposure to Nvidia’s continued growth and global leadership.
Since acquiring Mellanox, Nvidia has significantly expanded its R&D operations in Israel and built the country into one of its most important development centers. The company employs thousands of people in Israel, primarily engineers and other R&D professionals working on chips, software, artificial intelligence, communications and data center technologies.
The activity generates significant economic value in Israel by supporting highly skilled employment, expanding the country’s technology base and building expertise in some of the most important areas of the global AI infrastructure market. It also reinforces Israel’s position as a major center for AI and data center technologies.
But the scale of Nvidia’s presence creates a corresponding dependence. As the company becomes increasingly important to Israel’s technology sector and exports, the Israeli economy has more at stake in the continuation of the AI boom, and in Nvidia maintaining its position at the center of it.
