Armenia’s IT sector: current boom and future opportunities

Combined with existing incentives and educational programs, this influx has led to a boom in the IT sector. The impressive talent pool and innovative environment also offer strong investment prospects and cooperation opportunities. Along with its strengths in IT and semiconductors, Armenia has potential in software development, R&D functions and test systems for aerospace and robotics.

Strong growth due to an influx of Russian specialists

Armenia’s IT sector has been an important driver of economic growth in recent years. In 2021, it accounted for 3.5% of gross value added (GVA). Fast forward to 2024, and the IT sector has grown by an astonishing 351%. This represents an annual nominal growth rate of 88% – significantly higher than the rest of the economy, which also developed quite strongly. As a result, the sector’s GVA share reached a remarkable 8.3% in 2024. This figure is more than double that of other peer countries, such as Belarus, Ukraine and Russia.

A major factor behind the current boom is the influx of Russian IT specialists to Armenia since 2022. The inflow of foreign talent and companies helped to accelerate the development of Armenia as an IT location, making an important contribution towards skills development and innovation dynamics. The recent boom is not only reflected in its share in GVA but is also visible across many other indicators.

Recent developments and structural changes

Computer programming (i.e. software and hardware programming, maintenance and consultancy) is the main activity in the Armenian IT sector. Following the influx of Russian IT specialists, the GVA produced in this subsector increased by an astonishing 409% between 2021 and 2024. Other subsectors, such as media production, information services, and manufacturing, also grew strongly, but nowhere near as dynamically as computer programming. Accordingly, its share increased from 72% in 2021 to 82% in 2024.

Significant growth can also be observed in sectoral employment, which has almost doubled since 2021, reaching 44,400 jobs in 2024. Consequently, the share of sectoral employment in total employment increased from 1.9% in 2021 to 3.8% in 2024. Among peer countries, only Ukraine boasts a higher share (2023: 4.6%). As Russian IT specialists are highly paid, they also drove up sectoral wages.

The monthly average wage in US dollars almost doubled between 2021 and 2024. Even accounting for the strong appreciation of the Armenian dram, wages denominated in local currency still grew by 52%. It should be noted that wages in the rest of the economy also grew strongly. However, they remain far below those paid in the IT sector. Compared to its peers, Armenia overtook Ukraine (2023: USD 2,207) and Russia (USD 2,051).

Aside from the strong growth of employment and wages, which facilitated GVA growth, the sector also became more productive. Sectoral productivity in US dollars per employee increased by 141% between 2021 and 2024. It is currently roughly 2.3 times higher than in the overall economy.

The Armenian IT sector is strongly export-oriented. We estimate that IT exports (predominantly services) accounted for 14.2% of total exports in 2024. Moreover, the sector remains a major taxpayer, contributing 6.3% of total taxes paid in 2024. This figure, however, is below the GVA share, reflecting the sector´s favourable treatment in Armenia´s tax code.

Strong backbone in education and infrastructure

While the influx of Russian IT specialists was certainly a major driver of growth, the favourable environment in Armenia should also be credited. A major factor is the strong talent pool, which is deeply rooted in the education system. The numerous tech education programmes, such as Armath Engineering and the various TUMO centres, help to foster an interest in high-tech specialisations from a young age, as reflected in the constantly growing number of ICT students at universities. Close cooperation between universities and companies helps integrate talent directly into the labour force. This is further supported by various financial incentives, while numerous IT parks as well as venture capital and angel networks help companies grow.

Potential investment opportunities

Taking on the perspective of German companies, we identified potential subsectors in which cooperation with Armenia could be promising. Alongside its strengths in IT and semiconductors, Armenia has significant potential in software development and R&D functions, as well as test systems, particularly in niche sectors such as aerospace and robotics.

Outlook

The current boom in the Armenian IT sector has significantly increased productivity and attracted major attention from abroad. Recently, a substantial investment of USD 500 m was secured for the AI factory project “Firebird”. This project involves the construction of a large data centre in Armenia with the capacity to house up to 25,000 NVIDIA Blackwell GPUs. Even in its first stage, expected to be completed in 2026, the upcoming data centre in Armenia is projected to rank 14th worldwide in terms of potential computing power. This will likely boost sector activity and attract new companies. However, while all these developments are very positive, it should be noted that Armenia’s talent pool is limited in size. A crucial next step in boosting sectoral performance is shifting toward more advanced product development and away from the currently predominant outsourcing activity.

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This newsletter is partly based on the Policy Briefing “IT Sector Monitor Armenia” and the Policy Study “Segmentation for investment attraction measures targeting selected German manufacturing industries”.