Small and midsize businesses (SMEs) across Australia and New Zealand are adopting artificial intelligence at high rates, but many remain reluctant to trust it for autonomous cybersecurity decisions, according to new research commissioned by Arctic Wolf.
The company’s 2026 AI & Cybersecurity Trends Report, based on a global survey of 1,350 security and IT decision-makers conducted by Sapio Research, found 95% of ANZ SMEs already use AI or large language models (LLMs). Almost all (98%) have adopted or plan to adopt AI, and 69% expect it to drive their cybersecurity strategy over the next 12 months.
Despite this uptake, the report points to a “trust gap” in how SMEs view AI’s role in security operations. While 80% of ANZ SMEs believe AI will improve detection of new or sophisticated threats, 60% do not expect it to reduce alert volumes. Almost one-third (31%) said AI and agentic models are a top cybersecurity concern, citing data privacy, accuracy and the absence of human judgement.
The findings come as SMEs continue to report significant disruption from cyber incidents. More than 70% of ANZ SMEs said they have experienced a significant cybersecurity incident, with many reporting productivity losses of up to three weeks, the report said.
Arctic Wolf’s research also suggested a reliance on in-house coverage: only 23% of ANZ SMEs reported using an external partner for 24/7 security monitoring and response. The report noted that Australia ranked first globally for cybersecurity compliance and regulatory alignment, alongside ongoing operational disruption.
David Hayes, ANZ regional director at Arctic Wolf, said SMEs were now focused less on whether to use AI and more on how to deploy it securely and what decisions they are prepared to delegate. “The findings show that SMEs see real value in AI as a defensive tool, but they are not treating it as a silver bullet and nor should they,” Hayes said.
Globally, the report found 35% of leaders cited AI as their top cybersecurity risk, ahead of ransomware and malware for the second consecutive year. It also reported a gap between confidence and outcomes: 96% of leaders said they were confident in their team’s ability to manage modern threats, yet 63% experienced a significant cybersecurity incident in the last year.
Arctic Wolf Chief Information Security Officer Adam Marrè said the central challenge for organisations was trust. “Security leaders want the speed, scale, and efficiency AI can deliver, but they also need confidence that the outcomes are trustworthy, explainable, and aligned to their business,” Marrè said.
You can read the full report here.
