Author: Zhao Yuan, Editor: He Yueyang

As the core candidate for the “Next Generation Computing Terminal,” AR glasses have been lively for nearly a decade, experiencing the fiery growth of the metaverse concept, and welcoming the high-profile release of Apple VisionPro to announce the direction of spatial computing to the industry, then last year domestic giants also entered the market.

But amid the long period of noise, the industry has always lacked publicly available financial data to verify its true level of commercialization.

Until April 1st, XREAL, bearing the halo of “the world’s number one AR glasses shipment,” officially submitted its prospectus, becoming our key sample to observe the commercialization process of AR glasses industry.

From the launch of the first consumer-grade product in 2019 to maintaining the top global market share by 2025, XREAL has taken seven years to complete the path from technological exploration to scale expansion. However, the disclosed issues in the prospectus—such as ongoing losses, reliance on hardware sales, dependence on overseas markets—also expose common industry challenges.

Is the AR glasses business viable? This sample of XREAL may give us a reference answer.

I. Breaking the Ice in Commercialization: Good sales, but still losing money

XREAL was founded by Xu Chi in 2017, who remains the largest shareholder with a total voting rights of 27.98%. Before founding XREAL, Xu Chi worked at Nvidia and Magic Leap, involved in optical display technology R&D.

Within two years of founding the company, he and his team developed the world’s first consumer AR glasses.

Currently, XREAL’s product lineup covers three main lines: the entry-level Air series focusing on immersive viewing and mobile office scenarios; the mid-range One series enhancing display and interaction performance; and the high-end Light-Ultra-Aura product line, offering cutting-edge features like 6DoF interaction and spatial perception for developers and core users.

By 2025, XREAL’s revenue reached 516 million RMB, a 30.8% increase year-over-year. This growth rate isn’t extraordinary in the consumer electronics industry, but considering AR glasses are still a “market-education” stage product category, being able to maintain steady growth for three consecutive years is already impressive.

Breaking down the revenue structure, there are two highlights.

First highlight: product upgrades have driven up the unit price.

The main driver of growth is the One series. The One launched at the end of 2024 and the OnePro released in mid-2025 sold a total of 111k units, with an average selling price of 3,196 RMB, nearly double the Air series at 1,656 RMB.

Another product line, the Air series, plays a volume-driven role. However, sales dropped from 104k units in 2024 to 17k in 2025, mainly due to new product iterations leading to discounts on older models to clear inventory. Nonetheless, it helped XREAL build a user base over the past two years.

Second highlight: overseas markets support the majority of revenue.

In 2025, overseas revenue accounted for 71%. The US market contributed 190 million RMB, up 73%; Europe contributed 70 million RMB; Japan contributed about 75 million RMB. XREAL has established local sales teams in North America, Japan, and South Korea, with products available in 40 countries and regions.

A high overseas market share is both an advantage and a risk. The advantage is avoiding domestic price wars; the risk is facing geopolitical and tariff uncertainties.

In terms of profit, XREAL is still in loss. In 2025, net loss was 456 million RMB. Excluding fair value changes of preferred shares, warrants, and convertible notes, adjusted net loss was 250 million RMB. Net losses in 2023 and 2024 were 437 million and 375 million RMB respectively.

The positive side is that net losses are narrowing year by year, but 250 million RMB is still a significant figure for a company with annual revenue of 500 million RMB.

For a startup, losses are common; the key is whether there is enough cash to support until profitability.

XREAL lacks endogenous self-sustaining capability. Comparing the three years: operating cash outflows were 470 million RMB in 2023, 174 million RMB in 2024, and expanded to 203 million RMB in 2025, with large fluctuations.

It has always relied on successive rounds of financing.

As of December 31, 2025, XREAL’s cash and cash equivalents were only 63.36 million RMB, insufficient to cover current liabilities. Even excluding short-term liabilities like convertible notes, the cash cannot cover them.

If not for new financing inflows in January 2026, and if a brand initiates a price war, XREAL would be very passive, and the probability of future price wars is not low.

II. Slower burn rate, but efficiency remains a shortcoming

Looking at expenses, the proportion of R&D, sales, and administrative expenses to revenue decreased from 137.6% in 2023 to 82.7% in 2025.

The most notable change is in sales expenses. In 2023, they spent 214 million RMB; in 2024, 143 million RMB; in 2025, 131 million RMB, decreasing for two consecutive years. According to the prospectus, this is due to increased brand recognition and improved efficiency.

But the industry is still in early stages; increased recognition and future marketing expenses could rise significantly.

It should be noted that in sales, XREAL adopts a “direct sales + distribution” model, with direct sales accounting for over 70%.

Direct sales are mainly through the official website and flagship e-commerce stores, which offer high gross margins, direct user data, and strong brand control. The downside is high customer acquisition costs and limited coverage.

Distribution channels account for about 30%, including major consumer electronics retailers (like Best Buy) and regional distributors. The benefit of distribution is rapid market coverage; the downside is diluted gross margins.

In 2025, distribution revenue increased from 109 million RMB in 2023 to 151 million RMB, with the proportion rising from 27.5% to 29.2%. This indicates XREAL is increasing channel penetration.

Regarding expenses, R&D costs decreased from 216 million RMB to 183 million RMB, with the proportion of revenue dropping from 55.3% to 35.5%. This mainly results from reduced R&D service fees, team optimization, and less R&D material costs.

However, an 82.7% expense ratio is still far higher than mature consumer electronics companies, and this is a core reason for XREAL’s losses. For every 100 RMB earned, about 82.7 RMB is spent on R&D, sales, and management.

Of course, AR glasses are still in early investment stages, so direct comparison to mature categories isn’t entirely appropriate. But the trend must continue to improve: if the expense ratio cannot be significantly reduced in the future, it will impact the company’s fundamentals and investor patience.

This presents a business logic dilemma:

To maintain technological leadership, XREAL must sustain high R&D investment. To expand the market, it needs to maintain a global sales team and channel development. Costs are hard to cut significantly. The only way out is rapid revenue growth to dilute the expense ratio.

But currently, core AR glasses scenarios focus on viewing, gaming, and mobile office—high-frequency, essential scenarios have yet to explode. User penetration faces dual barriers of “price + experience.” Even though XREAL’s entry-level product price has dropped to around 2,000 RMB, it remains non-essential for ordinary consumers, who also have higher expectations for comfort, battery life, and content ecosystem.

In 2025, XREAL’s average inventory turnover days also reflect this: 187 days, meaning it takes about six months from raw material storage to product sale. Compared to leading consumer electronics companies, this still has room for optimization.

Consumer electronics are highly depreciable goods; the slower the sales, the higher the risk of depreciation. In 2023, 2024, and 2025, XREAL’s inventory write-downs were 12.2 million RMB, 13 million RMB, and 8.4 million RMB respectively.

This indicates that AR glasses are still a long-decision, slow-digesting low-frequency device.

III. Waiting for the “iPhone moment” of AR glasses

In 2025, the global smart glasses market size is about $2.3 billion, and the limited scale of the sector itself also caps the growth of AR glasses commercialization.

How to break this ceiling? We believe the key is the emergence of truly killer applications for AR glasses. A likely inflection point is the deep integration of AI and AR, such as real-time translation, navigation, information prompts—things that smartphones cannot do.

Currently, XREAL is essentially a hardware company, not a “hardware + software + services” platform.

The prospectus shows that in 2025, product sales accounted for 92.2% of revenue, with AR glasses contributing 78.1%, and services and other income only 7.8%.

XREAL’s “focus on AR hardware” path contrasts sharply with giants like Apple and Meta’s “ecosystem layout.”

Apple aims to quickly connect “hardware + content + services” through its iOS ecosystem and vast app store. Meta relies on its social ecosystem to build advantages in VR/AR integration.

Lacking application subscriptions, content monetization, and other value-added services, revenue growth heavily depends on hardware sales. But price wars and homogenization in hardware markets further compress profit margins. This single revenue structure makes AR commercialization vulnerable to risks and exposes lagging ecosystem development.

This strategic difference shows that early-stage AR commercialization can either pursue “professional hardware breakthrough” or rely on “ecosystem synergy,” but ultimately must solve the linkage of “technology—scenarios—ecosystem.”

XREAL also recognizes this. In its prospectus, it states that in 2026, it will launch “Project Aura,” equipped with Google’s AndroidXR operating system and Gemini AI large model.

This is a clever move: rather than fighting the ecosystem, it chooses to integrate into it. But risks are obvious: will Google support other hardware manufacturers simultaneously? Just like in the Android phone era, Google had Samsung as a “flagship,” but also nurtured many other brands.

XREAL needs to prove it is irreplaceable—either by establishing absolute leadership in optics and chips or by creating network effects through user scale.

Author’s statement: Personal opinions only, for reference.