<p>Artificial intelligence (AI) has been a major driver of economic growth in the last decade. Many organizations adopt AI to improve performance, but evidence shows that these benefits are primarily realized by large companies, leaving behind small- and medium-sized enterprises (SMEs). This study investigated the level of digitalization maturity as a technological foundation for AI readiness in Swedish manufacturing SMEs and examined its relation to organizational performance, focusing on revenue and operating profit (earnings before interest and taxes). Using a sample of 246 established SMEs undergoing digital transformation, descriptive statistics were calculated, and correlation and regression analyses were conducted. The results show substantial variation in digitalization maturity across firms and industries. Correlation analysis indicates that digitalization maturity is positively associated with performance, particularly in terms of revenue. Regression models show that higher digitalization maturity levels are associated with increases in revenue per employee, while the effects on profit per employee are weaker and less consistent. This suggests that in SMEs, performance improvements from digital capability development, which enables AI adoption, primarily emerge through revenue growth and productivity gains, whereas profitability effects may take longer to materialize. The study is limited by its cross-sectional design and the use of survey-based measures of digitalization maturity focused only on the technological perspective, which restrict causal interpretation. To determine the long-term impact of AI adoption and digital capability development on financial performance, future research should follow these companies over time. This study provides insights for SME managers and policymakers, emphasizing the importance of investing early in digital capabilities that enable efficient operations and future AI use.</p> Graphical Abstract <p></p>