Can xReality Group Sustain Growth Amid Heavy Reliance on US Defence Contracts?

xReality Group’s Market Leadership in XR Defence Training

In a detailed presentation at the Ord Minnett Defence & Defence Materials Conference, xReality Group (XRG) reaffirmed its position as a market leader in immersive Extended Reality (XR) solutions tailored for defence and law enforcement training. The company’s core product, Operator XR, has rapidly become the primary growth engine, outpacing legacy entertainment segments with its scalable and affordable tactical training systems.

Operator XR’s design focuses on realistic, mobile, and easy-to-use training environments that integrate real weapons and detailed scenario authoring. This unique offering, developed by veterans of Special Forces and law enforcement, combines proprietary hardware and software to deliver immersive, secure, and highly adaptable training solutions.

Strong Financial Momentum and Major Contract Wins

Financially, XRG reported a 28% increase in Annual Recurring Revenue (ARR) for Operator XR, reaching $6.0 million by the end of the quarter. The company’s total contract value (TCV) for the current fiscal year to date stands at $6.3 million, underscoring sustained sales momentum.

A standout highlight is the $5.7 million contract awarded by the Texas Department of Public Safety (DPS), marking Operator XR’s largest order to date. This multi-tranche deal includes $4.3 million for software licenses, systems, implementation, and two years of support, with an additional $1.4 million in optional services. Deliveries have commenced, with full payment expected by the end of December 2025. This contract not only validates Operator XR’s technology at scale but also establishes a high-profile reference customer within one of the largest US law enforcement agencies.

Ongoing Innovation and Product Pipeline

XRG is actively investing in product development, supported by a $2.1 million government grant under the Industry Growth Program. Key upcoming releases include Operator XR Sentinel, a larger-scale interoperable system aimed at military and federal customers, and Operator XR C-UAS, designed for immersive counter-drone tactical training.

The company is also integrating advanced AI capabilities to enable personalized training scenarios and instructor augmentation, alongside expanding 3D content libraries and cloud-based subscription services. These innovations are expected to unlock new markets and deepen penetration in existing accounts.

Global Expansion and Strategic Outlook

Geographically, XRG is broadening its footprint beyond the US, with growing distributor networks across Europe and the Asia-Pacific region. Demonstrations and proposals have been conducted in Japan, Taiwan, South Korea, Singapore, and the Philippines, while European interest continues to build following successful trials and trade shows.

The company’s strategic focus on onboarding global distributors aims to accelerate access to Tier 1 customers and whole-of-government opportunities. With a qualified sales pipeline now at $51 million; up 40% quarter-on-quarter; XRG is positioned for continued rapid growth through FY26 and beyond.

Meanwhile, the company is reviewing corporate options for its iFLY assets, maintaining profitable and cash-generative US operations that contribute positively during this transition phase.