How xReality Group’s Operator XR Is Transforming Defence Training Globally
xReality Group Limited reported a robust 36% revenue increase in FY25, driven by rapid expansion of its Operator XR platform and strategic balance sheet improvements. The company’s optimistic outlook for FY26 is underpinned by new contracts, AI investments, and international distributor expansion.
- FY25 revenue up 36% to $14 million, led by Operator XR’s 610% growth
- EBITDA turns positive at $0.6 million, reversing prior year loss
- Debt refinanced and $4.6 million converted to equity at 39% premium
- Operator XR expands US and Australian customer base to 67 clients
- Entertainment segment winding down to focus on high-margin training business
Strong Financial Momentum in FY25
xReality Group Limited (ASX – XRG) delivered a compelling financial performance in the fiscal year ending 2025, with total income rising 36% to $14 million. This surge was primarily driven by the Operator XR platform, which saw its recognised revenue skyrocket by 610% to $5.1 million. The company also improved its EBITDA to a positive $0.6 million, a significant turnaround from the prior year’s loss of $0.3 million, reflecting operational efficiencies and growing market traction.
Cash reserves increased to $2.8 million, providing a solid foundation to support ongoing projects and working capital needs. Notably, deferred revenue climbed 61% to $7.4 million, securing future income streams for FY26 and FY27 and underscoring the strength of multi-year contracts.
Balance Sheet Strengthened by Strategic Capital Moves
The company made decisive moves to fortify its balance sheet during FY25. Refinancing maturing debt with Causeway Financial and converting $4.6 million of debt into equity at a 39% premium, backed by prominent investor Steve Baxter’s Birkdale Holdings, demonstrated strong investor confidence. Additionally, a $2 million placement attracted new institutional investors, signaling market endorsement of xReality’s growth trajectory and positioning within the expanding defence and law enforcement technology sector.
Operator XR – Rapid Scaling and Market Validation
Operator XR’s growth story is central to xReality’s success. The platform’s product-market fit was validated across multiple tiers of the US military and law enforcement sectors, with total contract value (TCV) reaching $11.3 million, a 176% increase year-on-year. Annual recurring revenue (ARR) more than doubled to $4.7 million, reflecting a robust subscription model. The customer base expanded to 67 globally, including federal and state agencies, military organizations, and educational institutions.
Geographically, the US and Australia remain key markets, with 35 new US clients secured through targeted sales efforts and industry events. The company refined its US sales team structure to better address Tier 1-4 agencies and dedicated resources to distributors for international expansion. Enhanced customer success and technical support functions in the US aim to deliver superior post-sale experiences, critical for retention and upselling.
Investing in Innovation and International Growth
FY25 saw a $3.8 million investment in product development, including the integration of advanced AI and cloud capabilities led by AI expert Ash Crick. These enhancements aim to automate instructor workflows, improve training effectiveness, and unlock new licensing opportunities. The company is also developing new products focused on larger training scenarios and counter-unmanned aerial systems, broadening its value proposition.
Internationally, xReality is ramping up distributor partnerships across Southeast Asia, Europe, and the Middle East, positioning Operator XR for accelerated global sales growth in FY26. This strategic distributor network complements direct sales efforts and expands the company’s reach into new markets.
Shifting Focus Away from Entertainment
While the wind tunnel assets in Penrith and Gold Coast continue to generate positive cash flow, xReality is winding down its FREAK entertainment business to concentrate resources on the high-growth immersive training segment. The closure process is underway and expected to complete by the end of 2026, with minimal financial impact anticipated. The Penrith venue will remain operational to preserve optionality related to the wind tunnel assets.
Outlook for FY26 and Beyond
Building on FY25’s momentum, xReality’s board expresses strong confidence in the company’s growth prospects. Early wins in FY26, including a $5.71 million Texas State contract and a $2.1 million grant, reinforce this optimism. The company’s expanding product roadmap, ongoing US Department of Defense project, and global distributor network are expected to drive further revenue growth and market penetration. With defence and law enforcement spending trends favoring immersive training solutions, xReality is well positioned to capitalize on these tailwinds.
Chairman John Diddams highlighted the company’s leadership strength and strategic focus as key enablers for sustained value creation, thanking shareholders for their ongoing support as xReality navigates its next growth phase.
Bottom Line?
xReality’s FY25 achievements set the stage for accelerated growth, but execution on international expansion and US DoD commercialization will be critical to watch.
Questions in the middle?
- How will xReality commercialize the outputs from the US Department of Defense project post-May 2026?
- What impact will the entertainment segment wind-down have on overall cash flow and resource allocation?
- How quickly can international distributor partnerships translate into meaningful revenue growth?