Q1 2026 Was Supposed to Be About AI Scale. It Became a Lesson in AI Execution
The defining question is no longer whether organizations should pursue AI. It is whether they possess the necessary tools and skills to scale it successfully.
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[Image: Chetan Jha/MITSMR Middle East]
Key Takeaways
01
Throughout Q1, the central question for leaders was no longer whether to invest in AI, but whether their organizations had the governance, infrastructure, talent, and operating models required to scale it effectively.
02
Public-sector organizations that prioritized governance, sovereignty, and accountability early are proving better positioned for long-term AI adoption. Meanwhile, many private-sector firms are now paying the cost of retrofitting governance, security, and compliance frameworks after deployment
03
Organizations increasingly view cybersecurity, automation, sovereign infrastructure, and operational continuity as strategic enablers of growth rather than defensive functions.
04
As AI becomes widely available, competitive advantage will increasingly depend on an organization’s ability to redesign work, manage risk, build governance structures, and translate AI investments into measurable business outcomes.
At the start of 2026, the Gulf region was optimistic, much like the rest of the world, eager to accelerate AI adoption as organizations moved from experimentation to deployment.
But Q1 proved more complicated than expected.
Although AI and its implementation strategies remained a top focus in boardrooms, the quarter was significantly influenced by heightened geopolitical tensions. Escalating conflicts involving Iran, supply chain disruptions, issues with regional aviation routes, maritime security concerns, and uncertainties in global energy markets compelled executives to reevaluate their quarterly plans rapidly.
What also changed was the lens through which executives viewed investments. Organizations increasingly found themselves balancing transformation ambitions against questions of continuity, sovereignty, and resilience. While AI remained a strategic priority, the conversation began to shift from what organizations wanted to build to whether they had the institutional scaffolding to operate effectively amid increasing uncertainty.
According to Ihsan Anabtawi, technology executive and host of Future Now podcast, “Q1 was a more challenging quarter for the region than many anticipated at the start of the year. Coming into 2026, expectations across the GCC were broadly optimistic, but softer global conditions and continued geopolitical uncertainty created a more complex operating environment for some markets and sectors.”
“Clients aren’t debating whether to pursue AI anymore. They’re asking why their current environment can’t support it yet, and what it will take to get there. That’s the defining pattern of this quarter. What used to be positioned as a cloud program is now understood as a prerequisite for AI.”
— Hesham Fayed, President – Middle East & Africa at DXC Technology
At the same time, Anabtawi points out that the quarter demonstrated the region’s resilience, gained over the past decade through steady investments in diversification, infrastructure, and the building of strong institutions.
He says, “The UAE and Saudi Arabia in particular continued to demonstrate the benefits of sustained investment in diversification, infrastructure, and institutional capability. Non-oil sectors now represent the primary drivers of growth while governments across the region moved quickly to support liquidity, maintain investment momentum, and reinforce market confidence where needed.”
According to the latest official statistics, the UAE’s real gross domestic product (GDP) rose 6.2% year-on-year to $517.3 billion (AED 1.9 trillion), while non-oil GDP grew an even faster 6.8% to $408.4 billion (AED 1.5 trillion), showing how non-oil activities now account for the overwhelming majority of the economic output.
That combination of optimism and uncertainty ultimately defined Q1. The result was a shift in executive priorities. The question was no longer if companies should use AI, but whether they had what it takes to scale it up successfully.
Pattern of the Q1
The most important development of Q1 was not the growing enthusiasm around AI. That trend has been visible across the Gulf for several years as the UAE launched its AI strategy in 2017. What changed during the quarter was the realization that AI adoption and AI value creation are not the same thing.
Organizations throughout the region increasingly recognized that the greatest obstacles to AI deployment were bigger than the technological ones. Infrastructure availability continued to improve. Access to models expanded rapidly. Capital remained available for strategic initiatives. Yet despite those advantages, many organizations struggled to move beyond pilot programs.
According to Hesham Fayed, President – Middle East & Africa at DXC Technology, this shift became increasingly visible in conversations with clients throughout the quarter. He says, “Clients aren’t debating whether to pursue AI anymore. They’re asking why their current environment can’t support it yet, and what it will take to get there. That’s the defining pattern of this quarter. What used to be positioned as a cloud program is now understood as a prerequisite for AI.”
This observation highlights a market transition. During the first wave of AI adoption, organizations focused heavily on experimentation. Success was being measured by the number of pilots launched, use cases identified, or proofs of concept completed. Those activities generated valuable learning, but they also created the impression that experimentation itself represented progress.
Increasingly, organizations are discovering that scaling AI requires an entirely different set of capabilities.
The challenge is not unique to the Gulf. Research from around the world suggests that many organizations are encountering similar barriers as they move from experimentation to enterprise-wide deployment. However, the pace of AI adoption across the GCC is making those challenges visible sooner and on a larger scale.
According to a PwC study, 74% of AI’s economic value is being captured by just 20% of organizations. At first glance, the finding suggests that a small group of companies has access to better technology. Yet the research points to a different conclusion. The organizations generating the strongest returns are not necessarily distinguished by the models they deploy or the size of their technology budgets. Instead, they tend to share common organizational characteristics: clear governance structures, integrated data environments, executive alignment, and the operational discipline required to embed AI into day-to-day decision-making.
Another challenge involves how the organizations structure their work.
According to Deloitte, more than 80% of organizations globally have yet to redesign jobs and workflows to leverage AI capabilities meaningfully. Many continue to treat AI as an additional layer on top of processes originally designed for a different operating environment. While this approach can generate incremental productivity gains, it rarely delivers the transformational outcomes executives often expect.
The implication suggests that deploying technology alone isn’t enough. Organizations need to reconsider how they extract significant value from AI investments. Today, the biggest limitation to realizing AI’s potential is organizational rather than technological.
The varying pace of adoption across industries often creates the impression that some sectors are leading while others are behind. Q1 suggests a more nuanced reality. In many cases, organizations moving more cautiously are doing so because they are solving foundational challenges before scaling deployment.
According to Zane Ul Haq, Head of MENA at Endava, differences between sectors are less about enthusiasm for AI and more about the specific operational realities each industry must navigate.
“The maturity levels do vary by sector. Telecom groups, for example, are moving aggressively toward broader, scale implementation. In more heavily regulated industries such as financial services, the pace can appear slower from the outside, but that’s often because they are solving more foundational challenges around governance, trust, compliance, and operational risk,” he says.
“In reality, that reflects a high degree of maturity.”
“In more heavily regulated industries such as financial services, the pace can appear slower from the outside, but that’s often because they are solving more foundational challenges around governance, trust, compliance, and operational risk.”
— Zane Ul Haq, Head of MENA at Endava
Ul Haq says that the discussion of transformation is becoming increasingly sector-agnostic. That convergence may be one of the most important developments emerging across the Gulf. Organizations that once approached transformation through industry-specific lenses are increasingly arriving at the same strategic priorities.
A Tale of Two Sectors
One of the most revealing dynamics of Q1 was the way public and private sector organizations approached AI from different directions yet ultimately arrived at the same conclusion.
For years, public-sector institutions across the Gulf approached AI with a strong emphasis on governance, accountability, regulation, and sovereignty. Private-sector organizations, by contrast, often prioritized speed. The objective was to move quickly, test use cases, demonstrate value, and establish a competitive advantage before governance frameworks had fully matured.
During Q1, the strengths and weaknesses of both approaches became increasingly visible.
The public sector across Saudi Arabia and the UAE has been enthusiastic about AI from day one. According to Fayed, “That has created a stronger foundation for long-term adoption, even if it slowed the pace early on.”
Private-sector organizations often moved faster initially, but many are now encountering the costs associated with retrofitting governance after deployment.
“What we’re seeing now is a reset. Organizations are having to retrofit governance, security, and controls after the fact, and that’s proving more complex and more costly than getting it right up front. Speed created technical and governance debt that’s now coming due,” Fayed says.
The lesson emerging from both sectors is that governance and speed are no longer competing priorities.
This realization is occurring alongside another major shift: the rapid transition of sovereign AI from policy ambition into operational execution.
“What we’re seeing now is a reset. Organizations are having to retrofit governance, security, and controls, and that’s proving more complex and costlier than getting it right up front.”
— Hesham Fayed, President – Middle East & Africa at DXC Technology
Ul Haq says that the discussion of transformation is becoming increasingly sector-agnostic. That convergence may be one of the most important developments emerging across the Gulf. Organizations that once approached transformation through industry-specific lenses are increasingly arriving at the same strategic priorities.
“The conversation has moved from ‘why AI’ to ‘how do we run it securely and at scale?’ Demand for AI governance frameworks, data sovereignty solutions, and locally hosted infrastructure has grown at a pace we simply weren’t seeing twelve months ago,” says Fayed.
The pace of adoption varies by industry. Yet despite these differences, organizations across sectors are asking questions that will define AI maturity. Can their technology environments support long-term growth? Can they operate securely under geopolitical and supply chain disruptions? To what extent can they maintain sovereignty, adaptability, and trust as AI becomes more deeply embedded in operations?
Resilience as the Core Investment
If governance emerged as the defining enabler of scale, then resilience became the top investment priority.
In the past, organizations treated resilience as a defensive capability focused on business continuity and risk mitigation. Transformation initiatives focused on growth, innovation, and efficiency. Throughout Q1, those distinctions began to collapse.
Organizations increasingly understand that resilience is not simply about supporting transformation. It is enabling it. This shift is reshaping technology investment decisions across the region. They are prioritizing automation not only because it improves productivity but because it reduces exposure to labor shortages, supply chain disruptions, and inflationary pressures. They are investing in sovereign capabilities not only because of compliance requirements but because they strengthen strategic independence. They are increasing cybersecurity spending not only to prevent attacks but to protect operational continuity.
According to TrendAI’s State of AI Security Report, more than 2,130 AI-related vulnerabilities were disclosed globally during 2025, representing a 34.6% year-over-year increase. AI-related vulnerabilities now account for the highest proportion of total vulnerabilities ever recorded.
For Salah Suleiman, Managing Director, South Gulf, TrendAI, the implications are significant. “Cybersecurity is no longer an IT concern, but a boardroom-level imperative with direct implications for operational resilience, regulatory compliance, and brand trust. Organizations that simulate risk will outperform those that simply respond to it.”
The challenge becomes even more complex as organizations deploy agentic systems capable of acting autonomously across multiple functions.
According to Loubna Imenchal, Managing Director for the Middle East, Africa, Turkey, and Central Asia at Axis Communications, the region is undergoing a fundamental shift away from traditional security models.
“Across the Gulf, we are seeing a clear shift from traditional reactive security models toward predictive, intelligence-led operations,” she says. Governments and enterprises are no longer looking at security purely as protection; they are viewing it as a strategic enabler of operational resilience, urban efficiency, public safety, and citizen experience.”
This shift reflects broader changes in how organizations think about technology investment. Security systems are no longer operating in isolation. Increasingly, they are becoming part of integrated operational platforms that generate real-time insights across entire organizations.
“The region’s appetite for innovation, combined with government-led digital transformation initiatives, is creating one of the most dynamic security technology markets globally,” she adds.
“The region’s appetite for innovation, combined with government-led digital transformation initiatives, is creating one of the most dynamic security technology markets globally.”
— Loubna Imenchal, Managing Director for the Middle East, Africa, Turkey, and Central Asia at Axis Communications
According to Imenchal, three trends stood out during Q1:
- AI at the edge is gaining momentum: Organizations increasingly want AI-powered analytics deployed closer to where data is generated, enabling faster, real-time decision-making.
- Demand for unified platforms is growing: Enterprises are looking to consolidate video, audio, access control, sensors, analytics, and business intelligence into a single operational view.
- Resilient infrastructure is becoming a priority: As AI deployments scale, organizations are placing greater emphasis on infrastructure that can support performance, reliability, and business continuity.
As Ulhaq observes, “Businesses are no longer just asking how to digitize a process or improve efficiency. They’re asking whether the foundations they’re building today will allow them to remain agile, secure, and operationally independent five or ten years from now. I believe that this shift in mindset is one of the most important developments we observed during Q1.”
The key takeaway from Q1 2026 isn’t merely that the Gulf is now committed to AI—that’s obvious. If PwC’s estimate that nearly 75% of AI’s value is captured by only 20% of organizations holds true, then the upcoming major divide won’t be about AI adoption. Instead, it will focus on which organizations develop effective governance, skills, and workflows to translate AI investments into tangible business results.
What Leaders in Each Role Must Do Differently?
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RESEARCH CONTEXT
This article is based on executive insights gathered from technology and business leaders operating across the Gulf region during Q1 2026. Contributors include:
- Hesham Fayed, President – Middle East & Africa, DXC Technology
- Ihsan Anabtawi, Technology Executive and Host, Future Now
- Zane Ul Haq, Head of MENA, Endava
- Loubna Imenchal, Managing Director, Middle East, Africa, Turkey, and Central Asia, Axis Communications
- Salah Suleiman, Managing Director, South Gulf, TrendAI
Their observations were examined alongside regional economic indicators, AI adoption trends, cybersecurity data, and global research from organizations including PwC and Deloitte.
