xReality Rockets Q1 Sales on $5.7m Texas DPS Deal, US Expansion Accelerates

Strong Quarter Propels xReality’s Growth Trajectory

xReality Group Limited (ASX, XRG) has reported a standout start to FY26, with its first quarter marked by record sales and expanding market presence, particularly in the United States. The company’s headline achievement was securing its largest single order to date; a $5.7 million contract with the Texas Department of Public Safety (DPS). This deal not only underscores xReality’s growing footprint in the enterprise XR sector but also signals strong demand for its Operator XR systems among US law enforcement agencies.

The total contract value for Q1 leapt 269% quarter-on-quarter to $6.3 million, reflecting a surge in new business and contract renewals. Annual recurring revenue (ARR) also climbed 28% to $6.0 million, highlighting the company’s success in building a sustainable subscription-based revenue stream. These figures are particularly impressive given the company’s ongoing investments in product development and operational scaling.

US Market Expansion and Customer Growth

Beyond the Texas DPS contract, xReality expanded its US customer base by onboarding 12 new Operator XR clients across law enforcement and military sectors. This growth is part of a broader strategy to deepen penetration in the US market, which remains the company’s largest and most lucrative segment. The company also renewed two annual subscriptions in Australia, maintaining a balanced global presence.

Meanwhile, xReality’s entertainment division, including its iFLY Indoor Skydiving business, delivered stable performance despite a 14% decline in cash receipts compared to the prior corresponding period. Notably, iFLY hosted its most successful national championships in August 2025, reinforcing its brand strength in the entertainment space.

Operational and Financial Dynamics

Operational cashflow was negative $0.8 million for the quarter, primarily due to approximately $1 million in cash outflows related to fulfilling US orders, including $0.8 million in cost of goods sold for the Texas DPS contract. The company has purchased all inventory required for these deliveries, with cash receipts expected to commence in November 2025 and continue through December.

Looking ahead, xReality anticipates significant cash inflows in Q2 from the Texas DPS contract ($4.3 million), a $1.4 million milestone payment from a US Department of Defense project, and a $0.5 million Industry Growth Program grant. These inflows should help offset the current cash burn and support ongoing operational needs.

Leadership and Strategic Initiatives

To support its rapid growth and global expansion, xReality has bolstered its leadership team. Executive Director Kim Hopwood was promoted to Chief Operating Officer, broadening his responsibilities to oversee product technology, customer success, supply chain, and operational scaling across Australia and the US. Simon Maxwell was appointed General Manager USA, strengthening local leadership as the company accelerates its US market penetration.

Additionally, xReality has drawn $0.5 million from its secured Causeway Financial facility on a short-term basis to manage working capital during this busy delivery phase. The company expects to repay this amount by December 2025, with no additional fees associated with the drawdown.

Innovation and Product Development

Product innovation remains a priority, with ongoing investments in advanced XR features such as AI-powered personalized training scenarios, instructor escalation tools, drone counter-simulations, and cloud-based content subscription platforms. These enhancements aim to solidify xReality’s competitive edge in mission-critical training for military and law enforcement clients.

Overall, xReality’s Q1 performance reflects a company transitioning from early-stage growth to a more mature, contract-driven enterprise with a clear path to sustained revenue and market expansion.