The Philippines has a growing base of AI users but continues to lag in infrastructure, investment and workforce development needed to build a competitive domestic artificial intelligence industry, according to a 2026 report by Gobi Partners.
The report, Solo Horizons: Redefining Scale for the Philippine AI Economy 2026, identifies a widening gap between Filipinos’ adoption of AI tools and the country’s capacity to develop AI-powered businesses, applications and infrastructure.
It found that 86% of Filipino knowledge workers use AI at work, higher than the global average of 75%, based on Microsoft and LinkedIn data cited in the report. About a quarter of Filipino knowledge workers also qualify as “Frontier Professionals,” or those using AI agents for multistep tasks, compared with 16% globally.
However, only 14.9% of Philippine firms use AI tools, according to the Philippine Institute for Development Studies data cited in the report. Across the working population, 53% had used generative AI in the previous month, while only 14% used it daily.
The report said the country ranked 52nd among 139 economies in the 2026 Global Innovation Index and fifth among 25 outsourcing hubs in workforce AI literacy. It nevertheless placed last among its peers in education-pipeline readiness.
“The Philippines’ workforce has many strengths it can bring to an AI economy. These include English proficiency, familiarity with AI, and strong service skills,” said Jason Gaisano, managing partner for the Philippines at Gobi Partners, in his statement accompanying the report.
“Their industry and service experience helps them spot business problems worth solving and lays the groundwork for developing the country’s AI economy,” he said.
Gaisano said Philippine companies could use existing AI models to develop applications addressing business problems across industries, but warned that gaps between education and industry requirements must be addressed before the country can fully participate in the regional AI industry.
BPO sector faces disruption
The report identifies the information technology and business-process management (IT-BPM) sector as both a major opportunity for AI adoption and one of the industries most exposed to automation.
The sector employed about 1.89 million workers and generated $40.3 billion in revenue in 2025, based on data from the IT and Business Process Association of the Philippines cited in the study.
However, the report noted that as many as 100,000 jobs could become obsolete because of AI, citing an estimate by Kearney. A separate analysis by Ligot/Swarm placed the number of workers in high-risk occupations at approximately 680,000, with an estimated 306,000 potentially displaced by 2030.
The report cautioned that these figures measure different levels of exposure and should not be directly compared. Some estimates cover workers whose jobs are exposed to AI, while others focus on occupations with a higher probability of automation.
Call center agents, cashiers, data-entry clerks and bank tellers were among the occupations identified as particularly vulnerable.
The industry is already adjusting its growth expectations. IBPAP revised its 2028 targets to a best-case scenario of 2.14 million workers and $50.5 billion in revenue, down from its earlier projections of 2.5 million employees and $59 billion.
The report also identified a significant gap in workforce retraining. It estimated that about 150,000 workers need reskilling annually, compared with a combined government, industry and academic training capacity of approximately 53,500 people a year. The resulting annual shortfall is about 96,500 workers.
At the current pace, the report said, closing the gap could take around six years, despite a disruption window expected to peak in 2026 and 2027.
For BPO workers and other knowledge professionals, the report said AI fluency is increasingly becoming a baseline requirement rather than a competitive advantage. Human judgment, domain knowledge, quality control and client relationships are expected to become more important as AI takes over routine tasks.
One-person companies seen as opportunity
Despite the risks, Gobi Partners sees the emergence of AI-native one-person companies as an opportunity for the Philippines to expand its startup ecosystem.
These businesses are run by individual founders who use AI agents and other digital tools to perform functions traditionally handled by larger teams. The report said the technology lowers the capital and staffing requirements for starting a company, potentially allowing more Filipino professionals to develop products and services for international markets.
The trend is reflected in the country’s One Person Corporation registrations. The Securities and Exchange Commission recorded an increase of 27% to 8,640 registrations in 2024, according to the report.
Globally, solo founders accounted for 36% of new companies joining Carta’s platform in 2025, double their 18% share in 2016.
The Philippines already has a potential talent pool for this model, including its 1.89 million IT-BPM workers, freelancers, virtual assistants, technology graduates and employees of existing startups.
The report estimated that if just 1% of IT-BPM workers established their own companies, the country could produce about 19,000 businesses, exceeding the 14,000 Philippine startups tracked by Tracxn.
It proposed three upskilling tracks: helping existing founders use AI agents for business operations, incorporating entrepreneurship into university programs, and training BPO professionals and virtual assistants to turn their services into AI-enabled products.
However, the report also acknowledged that one-person companies may generate fewer direct jobs and could face challenges involving market access, financing and intellectual property.
Infrastructure and policy gaps remain
Beyond workforce readiness, the report identified infrastructure and investment as major constraints on the Philippines’ ability to develop a domestic AI industry.
The country has an established electronics and semiconductor manufacturing base, with $49.64 billion in exports cited by the Semiconductor and Electronics Industries in the Philippines Foundation. However, the report said the country remains behind regional competitors in the infrastructure and capital needed to support AI development.
It described the Philippines’ position as uneven: relatively strong in knowledge-worker AI adoption and English-language services, but weaker in institutional capacity, infrastructure investment and domestic AI funding.
Singapore accounted for 94% of Southeast Asia’s startup funding in the first nine months of 2026, while Taguig-based startups raised less than $130 million during the period, according to Tracxn data cited in the report. The Philippines also did not appear among the markets with disclosed AI-native funding.
The report further noted that the country has a national AI strategy but no dedicated AI law, with 26 House bills awaiting consolidation as of the report’s publication.
Its recommendations include strengthening data privacy and AI governance, closing gaps in the legal framework, improving coordination among government agencies, expanding incentives for startups and increasing investment in infrastructure and talent development.
It also called for stronger collaboration among government, industry and academe to ensure that training programs produce measurable skills and employment outcomes.
The Department of Information and Communications Technology, in its statement included in the report, said the country’s challenge was to translate AI adoption into enterprise growth and investment.
“The DICT remains committed to working across government, academe, and industry to build a more competitive and resilient Philippine startup ecosystem,” said Leandro Angelo Y. Aguirre, the department’s undersecretary for strategic initiatives and industry and competency development.
The report’s central argument is that widespread AI use alone will not establish the Philippines as a regional AI player. The country must build the infrastructure, talent pipeline, investment environment and policy framework that allow local companies to develop and scale their own solutions.
For the country, the opportunity lies not only in adopting AI developed elsewhere, but also in turning its existing workforce and industrial capabilities into a foundation for locally developed AI businesses.
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