xReality Group Posts 161% Growth in Operator XR Contract Value Amid Legacy Divestments

Strategic Shift to XR Training

xReality Group (ASX, XRG) is making a decisive pivot away from its legacy entertainment businesses to concentrate on its flagship product, Operator XR. This extended reality (XR) platform delivers immersive training solutions tailored for defence and law enforcement agencies worldwide. The company’s recent presentation at the Henslow Defence Conference highlighted Operator XR’s rapid growth trajectory and its potential to capture a significant share of a large and expanding global market.

Operator XR is designed to provide affordable, scalable, and realistic tactical training environments, addressing a critical gap where high-end simulators have traditionally been too costly or complex for widespread use. Its mobile, easy-to-use system supports scenario design, real weapon integration, and offline operation, making it highly adaptable for diverse operational needs.

Financial Momentum and Contract Wins

Financially, Operator XR is outpacing the legacy entertainment segment by a wide margin. Year-to-date revenue has reached $12.8 million, a 36% increase on the prior comparable period, with Operator XR contributing $4 million. The total contract value (TCV) for Operator XR has surged 161% year-on-year to $10.7 million, while annual recurring revenue (ARR) has more than doubled to $4.6 million.

Notably, the US Department of Defense project, valued at AUD 5.6 million over 20 months, is progressing on schedule with major milestones met. Revenue recognition is expected to accelerate in the latter half of 2025. This project not only provides immediate financial benefits but also strengthens XRG’s intellectual property ownership and positions the company for future licensing and follow-on contracts.

Legacy Asset Divestment and Balance Sheet Strengthening

In parallel with its growth in XR training, XRG is actively preparing to exit its legacy entertainment businesses, including the FREAK VR entertainment venues and iFLY indoor skydiving facilities. The FREAK venues are slated for closure as leases expire throughout 2025, while strategic options for iFLY are under review with corporate advisors. These moves aim to streamline operations and focus capital and management attention on the high-growth Operator XR platform.

Financially, the company has improved its balance sheet through a debt-to-equity conversion with major shareholder Birkdale, executed at a premium to the market price, and refinanced a $6 million secured debt facility. These actions provide greater financial flexibility to support growth initiatives and international expansion.

Global Expansion and Future Outlook

Building on its US success, XRG is expanding its global distribution network with engagements in key markets including Japan, Singapore, South Korea, and several European countries. The company is also developing SaaS and AI-enhanced products to drive recurring revenue streams and deepen customer engagement.

While the timing and certainty of legacy asset divestments remain uncertain, the company’s clear strategic focus and robust contract pipeline suggest a promising outlook. Investors will be watching closely as XRG transitions fully into a pure-play XR training business with significant growth potential.