XREAL, which is challenging the IPO, is really trying to cut costs, but still lost 450 million yuan.

Ask AI · Can XREAL’s IPO Become a Weather Vane for the Smart Glasses Sector?

Produced by | Huxiu Tech Team

Author | Wei Wen

Editor | Miao Zhengqing

Cover Photo | Taken by the author

The AR glasses sector is extremely capital-intensive; even the world’s number one, XREAL, has to go public to “extend its life.”

On April 1, XREAL submitted its prospectus to the Hong Kong Stock Exchange, with CICC and Citibank as joint sponsors. Data shows that XREAL has ranked first globally in AR glasses shipments for four consecutive years (2022–2025). By 2025, its market share reaches 27%, with the nearly 4,000 yuan One series selling 110k units, becoming the main force.

Being the largest scale still cannot prevent consecutive losses. The main reason is that revenue cannot support the huge investments in R&D and global sales channels.

Over the past three years, XREAL’s AR glasses sales have remained around 130k units annually, with annual revenue of 300–500 million yuan; but R&D costs must be at least 200 million yuan each year, plus 100–200 million yuan in sales expenses. Both expenses have long exceeded revenue.

Meanwhile, behind XREAL is a luxury investment group including Sequoia China, Yunfeng Fund, Hillhouse Capital, Alibaba, Kuaishou, and others. After ten years of growth and encountering a sector windfall, XREAL’s IPO appears more like a necessary move in a money-burning race among leading companies.

Caption: XREAL’s 2025 annual loss is 456 million yuan, with an adjusted net loss of 250 million yuan

A sector that needs hot money to lift it up

In the ups and downs of entrepreneurial waves, this is already the tenth year since XREAL was founded. The reality is: cash and cash equivalents on hand are only 63.36 million yuan. Looking closer, XREAL’s accumulated shareholder losses have reached 110k yuan. This is a gap that ten years of startups, 12 rounds of financing, and continuous capital injections have yet to fill.

XREAL was founded in 2017. After returning from the U.S., founder Xu Chi decided to establish an AR (augmented reality) glasses company, Nreal (Shenzhen TaiRuo Technology).

Over these ten years, the startup has watched peers go bankrupt one after another, and has witnessed several “difficult pregnancies” and reboots of Google’s AR glasses project. The company has personally participated in two key waves of AR glasses development.

The first wave was initiated by Google, and at that time, XREAL, just starting out, successfully secured capital; the second was triggered by Meta and Ray-Ban, which directly pushed the entire smart glasses sector into the spotlight, making XREAL, standing at the crest, a market focus again.

In September 2023, U.S. tech giant Meta, in partnership with Ray-Ban, launched the AI glasses Meta Ray-Ban. The following year, shipments reached 1.42 million units, while the global market for AI glasses that year was only 1.52 million units, almost monopolizing the majority of sales.

The success of this product ignited industry confidence, prompting giants like Baidu, Huawei, Xiaomi, Samsung, and newcomers to invest heavily, competing for one of the most important interaction interfaces of the AI era—glasses. The “Battle of a Hundred Glasses” officially began.

It was this wave of enthusiasm driven by Meta that revived XREAL’s dormant capital attention and indirectly helped it submit its IPO prospectus.

Reviewing XREAL’s financing history since its founding, apart from a one-year gap in 2023, the company completed 12 rounds of financing over ten years, totaling about 2.3 billion yuan. Before listing, XREAL completed its last round of $67.76 million (about 460 million yuan) Series D funding in January this year, with investors including Pudong Chuangling and Lixun Precision, valuing the company at approximately $833 million. Founder Xu Chi will hold about 27.98% of the voting rights.

However, contrary to the hot capital and industry buzz, XREAL, as a leading player, has seen no significant increase in AR glasses sales over the past three years. From 2023 to 2025, sales were 137.2k, 124.9k, and 133.7k units respectively—almost stagnant. Even as the smart glasses sector heats up, the AR glasses market has yet to see a sales inflection point. XREAL also states in its prospectus that smart glasses are still in early development and constantly evolving, leading competitors to frequently launch new products and spark price wars.

According to IDC’s latest “Global Smart Glasses Market Quarterly Tracking Report,” Meta dominates with 75.7% market share. Among the top five global smart glasses brands, besides Meta, the other four are all from China: Xiaomi, Ray-Ban, XREAL, and Viture. Most of these players are continuously bleeding cash: Meta, Xiaomi, TCL’s Ray-Ban, and Viture (which holds 16% of the AR market share) all have ongoing cash flow support. Viture, in particular, secured $100 million in Series C funding in February 2026, with ample ammunition to face competition head-on.

As the veteran with the largest share (27%), XREAL has not engaged deeply in this price war. It may have realized that price wars can severely damage a company’s vitality and long-term competitiveness. Instead, it is adjusting toward financial health—tightening marketing and sales investments. From 2023 to 2025, XREAL’s sales and distribution expenses were 210 million, 140 million, and 130 million yuan respectively, with marketing investments rationally decreasing.

Financial data below shows that XREAL has been trying to cut costs. From 2023 to 2025, gross margin increased annually from 18.8% to 35.2%; operating expense ratio gradually declined from 137.6% to 82.7%.

Even with aggressive cost-cutting, the heavy burden of ten years of losses, cash flow shortages, 12 rounds of investor waiting for exit, and a sector that’s still in its infancy make XREAL’s IPO seem inevitable—like an arrow on the string, ready to be released.

Caption: XREAL’s investor matrix

Where did 2.3 billion yuan go?

For XREAL, going public is not just a bonus but a lifeline.

Founder Xu Chi has publicly predicted that future AR glasses will bifurcate into two types: one lightweight AI assistant, and the other immersive entertainment and spatial office terminals. XREAL has chosen the latter, which involves higher technology, higher costs, and more money burning.

The author found that wearing XREAL’s AR glasses can indeed immerse users in watching colorful movies or playing games without dizziness. Most users aim to liberate their hands for immersive visual entertainment.

Achieving this user experience requires enormous investment.

Industry data confirms the “money-burning” nature of the AR sector: according to Bank of America research, the BOM cost of ordinary AI glasses is about $150, while dual-lens AR glasses hardware costs range from $400 to $1,000—3 to 6 times higher than the former. Optical modules, display panels, custom chips, structural design—each is a high-cost hard nut to crack.

XREAL’s funding has mostly been spent on optical and chip components and other smart manufacturing links.

For example, the Series B and B+ rounds raised 53.41 million USD to build its own AR optical module factory; the Series C round raised 120 million USD, partly for developing its own chip-side co-processors (X1 chip).

In addition, XREAL’s R&D expenses from 2023 to 2025 are 216 million, 204 million, and 183 million yuan respectively. Nearly 200 million yuan annually, comparable to the R&D scale of many large manufacturing groups.

Despite such high R&D investment, current AR glasses still have obvious shortcomings. The industry faces an “impossible triangle”: slim form factor, ultra-high battery life, and immersive display.

To use XREAL’s AR glasses, a cable connection is still required. This limits its use scenarios, currently mainly in gaming and among tech enthusiasts, with the mass market yet to fully explode.

This also means XREAL must continue investing in technological R&D—a vicious cycle: not investing leads to falling behind, investing results in losses.

XREAL is trying to address this pain point, for example, by moving toward high-end strategies. The One series launched in 2025 features XREAL’s self-developed X-Prism optical engine, a full-stack technology designed specifically for AR glasses, and NebulaOS operating system. With a high price of 4,000 yuan, the One series accounts for 110k units out of the total 130k units shipped.

For multi-scenario markets, XREAL plans a product matrix in 2026: a gaming model ROG XREAL R1 co-branded with Asus ROG, a cost-effective mainstream Project Helen, and a next-generation flagship Project Aura developed jointly with Google based on the Android XR platform.

Among these, the collaboration with Google’s ecosystem is XREAL’s most critical breakthrough this year. The product is expected to debut in the second half of the year. If Google’s Android XR ecosystem succeeds, XREAL could shift from a niche hardware brand to a major player in the global spatial computing platform arena.

Overall, even if we objectively explain why AR glasses manufacturers need so much funding, the fundamental problem remains: the AR glasses industry is too small, and the investment required is too large.

In the early stage when AR technology is not fully mature and consumer scenarios are still limited, how can capital markets believe in its long-term value? The financial data in the prospectus shows that XREAL’s answer is “continuous loss reduction” and “high-end transformation.” Whether this answer will be accepted by capital markets remains uncertain.

For the entire smart glasses sector, XREAL’s IPO is also a “touchstone.” Whether it can succeed, how much valuation the capital market assigns, and whether it recognizes the long-term logic of “AR glasses + AI hardware” will directly determine whether this wave of smart glasses enthusiasm is just a concept trend or the real future.