XReality Group has reported its strongest half-year performance yet, driven by rapid growth in its Operator XR business focused on immersive training solutions for defence and law enforcement.
- Total revenue up 41% to $10.4 million
- Annual recurring revenue from Operator XR grows 72% to $6.2 million
- EBITDA surges 190% to $2.6 million
- Operator XR sales pipeline doubles to $63 million
- Legacy entertainment business exit underway
Record Half-Year Results
XReality Group (ASX: XRG) has delivered a landmark first half for FY26, posting a 41% increase in total revenue to $10.4 million and a net profit after tax of $0.7 million, up $1.7 million on the prior corresponding period. This performance marks the company’s strongest half-year result since inception, underscoring the accelerating momentum of its Operator XR business.
Operator XR, XRG’s immersive extended reality platform tailored for defence and law enforcement training, now accounts for 63% of total revenue. Annual recurring revenue (ARR) from this segment surged 72% year-on-year to $6.2 million, reflecting growing adoption of its scalable software-as-a-service model.
Driving Growth Through Innovation and Expansion
The company’s strategic focus on Operator XR is paying dividends, with a qualified sales pipeline more than doubling to $63 million. This growth is underpinned by expanding customer footprints across the United States, Asia-Pacific, and Europe, including the first commercial sale in Japan. XRG is also broadening its product capabilities with the launch of counter-drone simulation technology and AI-powered analytics, positioning itself at the forefront of next-generation tactical training solutions.
Financially, EBITDA soared 190% to $2.6 million, supported by strong operational cash flow of $3.1 million, a 133% increase on the prior period. The balance sheet remains robust, with deferred revenue climbing 69% to $12.5 million, providing enhanced earnings visibility and underpinning future growth prospects.
Phasing Out Legacy Entertainment Business
While Operator XR drives growth, XRG is actively exiting its legacy VR entertainment operations, including indoor skydiving venues under the iFLY brand. This portfolio simplification aims to sharpen operational focus and improve capital efficiency. The final entertainment location is expected to close by June 2026, with strategic options for iFLY under review.
Looking ahead, XRG plans to accelerate geographic expansion, deepen its technology roadmap, and leverage its integrated platform to capture emerging defence and security market opportunities. The company’s transition from a diversified XR provider to a focused, scalable software-driven enterprise marks a pivotal moment in its evolution.
Bottom Line?
XReality Group’s pivot to Operator XR and its expanding global footprint set the stage for sustained growth, but investors will watch closely as the entertainment exit unfolds and new contracts materialise.
Questions in the middle?
- How quickly will Operator XR convert its $63 million sales pipeline into revenue?
- What impact will the entertainment business exit have on overall profitability?
- Can XRG maintain its US market momentum amid increasing competition?