The aim of this research is to model the “smart innovation of Islamic brand identity” and explain its consequences on the performance of the Iranian youth clothing market, because despite the theoretical emphasis on Islamic identity in the branding literature, the operational, data-based, and smart mechanisms of this identity and its role in improving market performance—especially in the dynamic, digital, and sensitive adolescent market—have not been systematically explained. The present research was conducted with a qualitative approach and using data-based theory. Data were collected through 15 in-depth semi-structured interviews with key experts in the youth clothing industry, including brand managers and founders, designers, marketing and branding specialists, innovation managers, and cultural identity consultants, and the sampling process continued until theoretical saturation was achieved. Data analysis was conducted using open, axial, and selective coding. The findings led to the extraction of an integrated paradigmatic model in which “data-based smart Islamic brand identity” was identified as the central phenomenon. Causal conditions include dynamic and generation-oriented redefinition of Islamic identity, value flexibility, and utilization of learning and data analysis infrastructures; contextual conditions are influenced by socio-cultural developments of adolescents, digital space, and intense competition in the apparel market; and intervening conditions include digital trust, behavioral transparency, identity coherence, and perceived brand credibility. The extracted core strategies include intelligent personalization of the shopping experience, two-way and data-driven interaction with the adolescent market, intelligent design of the Islamic identity message and narrative, and predictive analysis of consumer behavior. The consequences of these strategies were explained in the form of significant improvement in market performance, increased sustainable loyalty, promotion of competitive resilience, and agility of brand decision-making. The main innovation of the research is to present a native, contextual, and data-driven model that places Islamic identity at the heart of brand innovation, not as a symbol or slogan, but as an intelligent, learning, and decision-making process, and shows that truly intelligentizing Islamic identity can lead to sustainable competitive advantage in the Iranian youth clothing market.