"Net loss of 2 billion over three years," just how costly are AR glasses?

Ask AI · How does XREAL balance huge losses with market leadership?

Recently, AR glasses company XREAL submitted an IPO prospectus to the Hong Kong Stock Exchange, aiming to become the “First Stock of Smart Glasses.” According to the prospectus, based on sales revenue, from 2022 to 2025, XREAL has ranked first globally in the AR glasses market consecutively. From financial data, in 2025, XREAL achieved revenue of 516 million yuan, with a net loss of 456 million yuan. How “costly” are AR glasses?

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Founder is a former NVIDIA employee**

The prospectus shows that XREAL is responsible for designing, developing, manufacturing, and selling AR glasses and providing related products and services. It was established in 2017. Founder Xu Chi is an 80s-born, who previously worked at NVIDIA and AR company Magic Leap.

As of now, XREAL has gone through nine rounds of financing, with investors including Taobao China Holdings, Cosmic Blue under Kuaishou, Shunwei Capital, and other well-known institutions. On January 23, 2026, XREAL completed Series D financing, with a post-money valuation of $833 million (about 5.73B RMB at current exchange rates).

Currently, XREAL’s product lines are divided into the Air series, One series, and Light-Ultra-Aura product lines, and they have developed their own operating system, NebulaOS. The Air series is XREAL’s entry-level product line with the broadest user base, focusing on immersive viewing, console gaming, and mobile office scenarios, connecting to smartphones, PCs, and gaming consoles.

The One series enhances display performance and interaction capabilities, equipped with electrochromic lenses that automatically adjust brightness based on lighting conditions. The Light-Ultra-Aura product line represents the evolution of XREAL’s products toward next-generation spatial computing. The upcoming flagship Project Aura will increase FoV (field of view) to about 70 degrees, integrate enhanced spatial computing and multimodal AI capabilities, and is expected to run on the Google Android XR platform.

In 2025, the average selling price of Air series products was 1,656 yuan, compared to 2,151 yuan in 2023 and 2,325 yuan in 2024; from 2023 to 2025, sales volumes of the Air series were 134.1k, 104k, and 17.4k units respectively.

Launched in December 2024, the One series had an average price of 3,196 yuan in 2025, with sales of 111.4k units. The Light-Ultra-Aura product line’s average price continued to decline, from 4,515 yuan in 2023 to 3,665 yuan in 2025. From 2023 to 2025, sales volumes for this series were 3,165, 7,368, and 4,973 units respectively.

In the IPO prospectus, XREAL states that during the track record period, changes in sales volume and average selling price mainly reflect differences in product launch timing, pricing strategies, high prices for some limited-edition products, and discounting of classic models after new generations are released.

According to the prospectus citing iResearch data, the global smart glasses market reached about $2.3 billion in 2025 and is expected to grow to approximately $24 billion by 2030. Global AR glasses sales are projected to reach 22.2 million units by 2030, with a compound annual growth rate of 130.9%. Based on sales revenue, from 2022 to 2025, XREAL has ranked first in the global AR glasses market every year.

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Liquidity under pressure, net debt exceeds 3 billion yuan**

The prospectus shows that from 2023 to 2025, XREAL achieved revenues of 390 million yuan, 394 million yuan, and 516 million yuan, with gross profits of 73.32 million yuan, 87.30 million yuan, and 181 million yuan respectively. Net profit was continuously negative, with losses of 882 million yuan, 709 million yuan, and 456 million yuan in 2023–2025, with net loss rates of 226.1%, 179.6%, and 88.4%, respectively, with losses exceeding the same year’s revenue at times.

According to the prospectus, the main reasons for XREAL’s net losses are threefold. First, fair value changes of preferred shares, warrants, and convertible notes, which reached 439 million yuan, 328 million yuan, and 203 million yuan from 2023 to 2025. Second, R&D expenses, which were 216 million yuan, 204 million yuan, and 183 million yuan respectively. Additionally, global market education and channel development-related sales and distribution expenses also contributed, totaling 214 million yuan, 143 million yuan, and 131 million yuan over the same period.

Excluding the above fair value changes and share-based payment expenses, XREAL’s adjusted net loss narrowed from 437 million yuan in 2023 to 250 million yuan in 2025, a reduction of 42.8%.

Regionally, overseas markets have become a key contributor to XREAL’s revenue. From 2023 to 2025, overseas revenue accounted for 65.3%, 65.9%, and 71.0% respectively. The U.S. is XREAL’s largest global market in 2025, generating 190 million yuan; Mainland China ranks second, with 150 million yuan in revenue.

In terms of revenue composition, AR glasses remain XREAL’s main source, with revenues of 300 million yuan, 308 million yuan, and 403 million yuan from 2023 to 2025, accounting for 77.6%, 78.1%, and 78.1% of total revenue respectively. Accessories revenue declined from 80.58 million yuan in 2024 to 72.74 million yuan in 2025, with the proportion dropping from 20.4% to 14.1%.

High sales costs are a major obstacle to XREAL’s profitability. The company states in the IPO prospectus that controlling sales costs and improving operational efficiency are fundamental to achieving profitability. From 2023 to 2025, sales costs were 317 million yuan, 307 million yuan, and 335 million yuan, respectively, accounting for 81.2%, 77.9%, and 64.8% of total revenue that year.

The prospectus shows that XREAL’s sales costs mainly include material costs, contract manufacturer expenses, and direct labor costs. Material costs are the largest component, accounting for over 70% of sales costs for three consecutive years, increasing with overall sales volume. Moving forward, as the company continues to expand in the smart glasses industry and invests in R&D, costs and expenses are expected to continue rising.

In this context, in 2025, XREAL reduced sales and distribution expenses, as well as R&D expenses. Specifically, sales and distribution expenses decreased by 12.18 million yuan to 131 million yuan, and R&D expenses decreased by 21.25 million yuan to 183 million yuan compared to the previous year.

Meanwhile, XREAL’s cash flow remains under pressure. From 2023 to 2025, net cash used in operating activities was negative for three consecutive years, ending at -203 million yuan in 2025. The same year, net cash from financing activities was 87.78 million yuan, with cash and cash equivalents at 63.63 million yuan at year-end.

XREAL states in the IPO prospectus that operating cash outflows are expected to continue, and plans to improve operating cash flow by strengthening relationships with existing customers, expanding the customer base, launching and upgrading high-quality products that meet customer needs, and streamlining cost structures.

Additionally, as of December 31, 2025, XREAL’s total current assets were only 405 million yuan, total assets 541 million yuan, and total liabilities 134.1k yuan; net debt reached 104k yuan, with net current liabilities of 17.4k yuan, all further expanding compared to 2024. The company notes that the net current liabilities may pose a risk of liquidity shortages, and ongoing negative net debt could impact liquidity, fundraising, bank borrowing, and debt repayment ability.

For this listing, XREAL plans to raise funds for R&D investment, global branding, strengthening sales and distribution networks, building new self-operated production lines, and upgrading existing manufacturing infrastructure. According to their strategy, while enhancing technology, XREAL will further refine its product portfolio to cover different price segments; integrate AI into products; and introduce various AI service business models for enterprise and individual users to create profit opportunities; accelerate expansion into Oceania, Middle East, and Southeast Asia markets.

(The opinions in this article are for reference only and do not constitute investment advice. Investing involves risks; proceed with caution.)

Author | Zheng Yijia

Editor | Chen Junming

Proofreader | Luo Kun, Li Zhongyuan