My research investigates how artificial intelligence (AI) capabilities and data quality governance influence organizational performance in small and medium-sized enterprises (SMEs) operating under environmental uncertainty. Using an Input–Processing–Output (IPO) framework, the study examines how AI capabilities and data governance affect decision-making efficiency, analytics integration, and strategic agility, ultimately impacting operational and financial performance. The research applies Partial Least Squares Structural Equation Modelling (PLS-SEM) to empirically test these relationships while considering moderating factors such as environmental uncertainty and digital readiness. The study contributes to theory and practice by explaining how SMEs can transform AI-driven insights into improved strategic decision-making and sustainable performance in volatile business environments.