xReality Posts 85% Rise in Quarterly Cash Receipts, Doubles Sales Pipeline
xReality Group Limited has reported its strongest quarter yet, with record cash receipts and a doubling sales pipeline, underpinned by major US defence contracts and expanded production capacity.
- Record quarterly cash receipts of $7.4 million, up 85% year-on-year
- Sales pipeline doubles to $63 million, driven by US defence and law enforcement contracts
- Operator XR division grows annual recurring revenue to $6.2 million
- New $5.7 million Texas Department of Public Safety contract fulfilled on time
- Expanded production capacity with new Brookvale headquarters and key executive hires
Strong Financial Momentum
xReality Group Limited (ASX – XRG) has delivered a standout performance in the second quarter of fiscal 2026, reporting record cash receipts of $7.4 million. This marks an 85% increase compared to the same period last year and a 20% rise quarter-on-quarter, signalling robust demand across its extended reality (XR) offerings.
Net cash from operating activities reached $3.1 million, reflecting strong sales execution and effective cash management. The company’s total contract recurring value revenue climbed to $7.8 million, up 23% from the previous quarter, while annual recurring revenue (ARR) for its Operator XR division surged 28% year-to-date to $6.2 million.
Major US Defence and Law Enforcement Wins
The Operator XR segment, focused on defence and law enforcement training technologies, continues to be the growth engine. Notably, xReality fulfilled a $5.7 million contract with the Texas Department of Public Safety (DPS), delivering VR training systems and associated services on schedule. This contract alone contributed significantly to the quarter’s cash inflows.
Additionally, progress on a $5.6 million project with the US Department of Defense remains on track for completion by April 2026. The company is actively developing export compliance and commercialisation strategies to leverage this capability in future markets.
Operator XR also launched a new Counter Drone training system at the I/ITSEC military simulation conference, receiving strong market interest from NATO-aligned stakeholders. The division added 11 new US law enforcement and military customers during the quarter, expanding its global footprint to 89 agencies worldwide.
Scaling Production and Leadership
To support its growing order book and product development, xReality secured a new approximately 740 square metre headquarters in Brookvale, NSW. This facility doubles production throughput and provides dedicated space for software engineering, positioning the company for medium-term scaling.
Strategic hires include the appointment of Benjamin Smith as Chief Commercial Officer, bringing over 17 years of experience in defence and technology sectors, and a Head of AI to accelerate the Operator XR AI roadmap. These moves underscore the company’s commitment to commercial execution and innovation.
Entertainment Segment Update
While the Operator XR business drives growth, the entertainment division also showed resilience with a 15% quarter-on-quarter increase in cash receipts to $2.15 million, buoyed by successful school holiday campaigns. However, iFLY Downunder experienced a temporary mechanical issue in January 2026, leading to a brief operational pause expected to resolve by early February.
Outlook
With a strong cash position of $3.7 million and no immediate financing needs, xReality is well placed to capitalise on its expanding sales pipeline and product innovation. The company’s focus on defence and law enforcement markets, combined with strategic investments in AI and production capacity, suggests a promising trajectory for FY26 and beyond.
Bottom Line?
xReality’s record quarter and expanding pipeline set the stage for accelerated growth, but execution on large defence contracts and AI integration will be key to sustaining momentum.
Questions in the middle?
- How quickly can xReality convert its $63 million sales pipeline into revenue?
- What commercial opportunities will emerge from the US Department of Defense project post-completion?
- How will the new AI leadership influence product innovation and competitive positioning?
