PETALING JAYA: Daythree Digital Bhd
is betting that heavy investments in artificial intelligence (AI) capabilities and talent will position the group for stronger long-term growth, even as the spending continues to weigh on near-term earnings.
The digital-first business process services provider slipped into the red in the financial year ended Dec 31, 2025 (FY25), despite broadly flat revenue, as it stepped up investments in AI capabilities, technology and specialised talent to prepare for what it sees as the next evolution of the industry.
For FY25, Daythree posted a net loss of RM465,936, compared with a net profit of RM3.01mil a year earlier, while revenue was little changed at RM89.83mil.
Gross profit, however, rose to RM15.42mil from RM11.49mil previously.
The trend continued into the first quarter ended March 31, 2026, with revenue remaining largely flat at RM19.52mil, while the net loss narrowed to RM1.8mil from RM3.19mil a year earlier.
Managing director Raymond Davadass said the weaker bottom line reflected a conscious decision to reinvest in the business rather than deteriorating fundamentals.
“Our investments in AI readiness take a big part away from our gross margins,” he said. “If we don’t reinvest now, we won’t be around in two years’ time,” he said.
According to Raymond, the group is expanding its AI and digital capabilities, hiring more AI-skilled talent and developing proprietary technologies, with the investment cycle expected to continue over the next 12 to 18 months.
The investments come as he believes the traditional business process outsourcing (BPO) model is undergoing its biggest transformation in decades.
Traditionally, outsourcing was driven by labour cost arbitrage and scalability, where companies outsourced customer service and back-office functions to lower-cost locations, he said.
Today, however, Raymond said customers are increasingly looking beyond lower operating costs and instead expect outsourcing partners to provide data analytics, automation and AI-enabled solutions.
“The conversation today is no longer about headcount. It’s outcome-driven.”
Instead of paying vendors based on the number of agents deployed, companies are increasingly evaluating outsourcing partners on service quality, customer satisfaction, speed of resolution and their ability to leverage data, automation and AI to improve business outcomes.
Raymond said Daythree has always positioned itself as a technology-led business rather than a conventional BPO operator, making AI a natural evolution rather than a fundamental shift in strategy.
“Technology is available. The success between one organisation and another organisation depends on how they orchestrate and use the technology,” he said.
The group manages customer relationship operations for nearly 40 accounts, many of them multinational corporations (MNCs) and Malaysian-listed companies.
According to Raymond, large-scale outsourcing continues to be driven primarily by MNCs seeking specialised customer engagement services.
He said AI is already helping customer service agents resolve issues faster and reduce repetitive work, although human intervention remains necessary for more complex decision-making.
“Today, AI is aiding the agents,” he said.
“Hence, transactional works, works that are repetitive and rule-based, will get wiped out first.”
He said AI could unlock productivity gains of between 40% and 50% for customers when implemented effectively.
“If done correctly, we are looking at 40% to 50% easily. It all depends on the orchestration of how you use AI,” he said.
However, Raymond stressed that automation should not come at the expense of customer experience.
He noted that while large language models are becoming increasingly capable of understanding customer requests, they are still unable to independently complete many business processes that require approvals or governance.
“Without data, AI is nothing,” he said, adding that strong governance and trust remain essential as customers increasingly share sensitive data with outsourcing partners.
To accelerate its AI ambitions, Daythree earlier this year brought in FPT Software Malaysia Sdn Bhd, a subsidiary of Vietnam-listed FPT Corp, as a strategic shareholder through a 10% share subscription.
Raymond described the partnership as a significant step in strengthening the group’s technology capabilities and supporting its regional expansion.
“We have about 20 data scientists. They have about 2,000 data scientists,” he said.
“We feel that in order to grow faster, we need a stronger partner in that space.”
About 80% of Daythree’s revenue currently comes from Malaysia, with the FPT partnership expected to support the group’s regional expansion into markets such as Singapore, Indonesia, the Philippines and Vietnam, he said.
Raymond said the traditional distinction between BPO providers and information technology (IT) service companies is beginning to blur.
“BPOs cannot survive if they don’t provide some form of IT services.”
Ultimately, he said, the future of outsourcing lies not in providing the cheapest workforce, but in delivering business transformation through technology.
“Together with them, we are looking at how we can transform this business, provide better value, not just from a traditional BPO point of view based on cost, but through data, automation and intelligence.”
Despite growing geopolitical uncertainty and softer corporate spending globally, Raymond believes outsourcing demand could remain resilient as businesses continue searching for ways to reduce operating costs.
“We have not felt the real hit yet,” he said, when asked about the effect of the war in the Middle East.
“If anything, it is spurring the outsourcing industry more than anything else. People are looking at reducing costs.”
