The "AR Four Dragons" have recently captured significant attention. At the beginning of the year, RayNeo completed a new funding round exceeding 1 billion yuan, led by China Mobile's Chain Leader Fund and CITIC Jinshi, with participation from China Unicom's Lianchuang Innovation Fund and 37 Interactive Entertainment's venture capital fund, marking AR devices' official entry into national communication infrastructure. Just ten days later, INMO announced a C1 round of financing from Chengdu Science and Technology Investment, Nanshan Zhanxin Investment, and Pufeng Capital, reaching a post-investment valuation of 2 billion yuan, only five months after its previous round. Following closely, Rokid completed its share reform after receiving 180 million yuan from Conant Optical, with rumors suggesting a potential Hong Kong listing by late April.
XREAL has now advanced to the doorstep of the Hong Kong Stock Exchange, with China International Capital Corporation and Citigroup acting as joint sponsors, aiming to become the "first smart glasses stock." According to its prospectus, the company reported total revenues of 390 million yuan, 394 million yuan, and 516 million yuan for 2023 to 2025, with growth accelerating sharply from 1.0% to 31.0%. Net losses were recorded at 882 million yuan, 709 million yuan, and 456 million yuan, showing a significant narrowing of losses.
However, even after excluding non-operating items such as fair value changes of preferred shares, warrants, convertible notes, and share-based compensation expenses, XREAL's adjusted net losses over the past three years accumulated to nearly 1.1 billion yuan. Although the company's gross margin improved from 18.8% to nearly double at 35.2% during the reporting period, sales, administrative, and research expenses remained substantial, totaling approximately 2.35 times the gross profit in 2025.
The decision to pursue a listing despite ongoing losses raises questions: Is consumer-grade AR glasses on the verge of a breakthrough, or are VC/PE institutions pressured by exit demands?
The U.S. market supports nearly 40% of XREAL's revenue, while sales of its entry-level products plummeted by 87%. In a recent industry conference on "AI+AR glasses," China Merchants Securities disclosed that global smart glasses shipments reached 14.518 million units in 2025, a 42.5% year-on-year increase, with the Chinese market growing 121% to approximately 2.907 million units. According to RUNTO, global AR glasses shipments were about 1.1 million units, up 41%, while the Chinese market saw sales of 452,000 units, a nearly 70% increase.
Interestingly, despite China's rapid market growth, XREAL did not appear to benefit significantly. From 2023 to 2025, its revenue in mainland China was 135 million yuan, 134 million yuan, and 150 million yuan, respectively, with a compound annual growth rate of only 5.4%, and its contribution to total revenue declining from 34.7% to 29.0%. In contrast, XREAL's overseas revenue grew steadily from 255 million yuan to 366 million yuan, accounting for over 70% of total revenue in 2025, with the U.S. market representing about half of overseas revenue and 30%-40% of total revenue.
This concentrated regional exposure makes XREAL's performance highly sensitive to overseas consumer demand, competition, and regulatory changes, creating a "prosper together, suffer together" risk. On one hand, product exports are vulnerable to geopolitical and trade tensions. Although VR/AR devices were partially exempted from 2025 tariff disputes, policy uncertainty remains a long-term concern. XREAL may need to shift assembly to third countries like Vietnam, potentially increasing operational costs and eroding already thin profit margins.
On the other hand, overseas regulatory scrutiny of Chinese tech firms is intensifying. The U.S. International Trade Commission previously investigated XREAL for 11 months over intellectual property infringement in imports. Shortly after reclassifying all products as "AR glasses" in December 2025, the company attracted attention from EU regulators under GDPR. Additionally, U.S. export controls restrict XREAL's access to advanced computing chips, potentially leaving it behind competitors like Meta and Apple.
XREAL's sales have shown signs of fatigue in recent years. Total unit sales were 137,200, 124,900, and 133,700 from 2023 to 2025, indicating near stagnation. Specifically, the consumer-focused Air series struggled with price reductions failing to boost volume; average selling price dropped from 2,151 yuan to 1,656 yuan, yet sales plummeted from 134,100 units to 17,400 units, an 87.0% decline, with its share of total sales falling to 12.7%.
In contrast, the high-end One series, launched in December 2024, grew rapidly, with average selling price rising 18.0% to 3,196 yuan and sales reaching 111,400 units in 2025, accounting for 83.3% of total sales. However, XREAL is currently embroiled in patent disputes with VITURE involving the One series models, including XREAL ONE, XREAL ONE PRO, and XREAL 1S. A loss in litigation could force discontinuation, jeopardizing this new foundation.
According to the prospectus, the Air series was XREAL's first mass-market product, and its sharp decline reflects a mismatch between consumer demand and industry supply for AR glasses. XR Vision data shows average return rates for AR glasses on major e-commerce platforms like JD.com and Tmall reaching 30%, and even 40%-50% on live-streaming platforms like Douyin, with consumer satisfaction below 70%.
Key issues include poor wearability, as most products weigh 36-50 grams, while XREAL's Air series starts at 72 grams and the One series reaches 87 grams, about four times heavier than regular glasses. Lack of differentiated features is another concern; standard AR functions include first-person view recording, real-time translation, and voice assistants, with primary applications still focused on gaming and video viewing. XREAL's office scenario for the One series merely involves screen projection. Short battery life is also a problem, typically lasting 4-6 hours with normal use, requiring frequent recharging that raises user barriers.
In other words, consumer AR glasses are not yet essential products and have not reached the anticipated "iPhone moment," meaning high hardware costs are unlikely to be offset by economies of scale in the short term. Consequently, XREAL is shifting focus to the enterprise sector. In 2026, it plans to launch Project Aura, developed with Google, a gaming-oriented product with ASUS ROG, and customized AR glasses for NIO's in-car entertainment system. As of December 31, 2025, services and other revenue accounted for only 7.8% of total revenue, and whether this can become a second growth driver remains uncertain.
With cash reserves below 64 million yuan, over 30 VC/PE institutions are eager for exits. XREAL's sales challenges are also reflected in inventory. From 2023 to 2025, inventory values were 189 million yuan, 166 million yuan, and 181 million yuan, with finished goods comprising 59.4%, 69.2%, and 70.8%, showing an increasing trend. Inventory as a percentage of current assets rose from 24.7% to 44.6%, with average turnover days of 157, 209, and 187 days, respectively.
Persistent losses and rising inventory highlight weak self-sustainability and liquidity constraints. Net cash outflows from operations were 472 million yuan, 174 million yuan, and 203 million yuan from 2023 to 2025. By December 31, 2025, cash and equivalents fell to 63.634 million yuan, down 68.8% from 205 million yuan at the end of 2024. Short-term interest-bearing debt totaled 147 million yuan, with current and quick ratios at 0.1 and 0.06, well below safe levels. XREAL acknowledged in its prospectus the need for continuous financing to address liquidity shortages.
On January 23, 2026, XREAL urgently initiated a Series D round of $67.7649 million, with investors including state-backed Pudong Capital, Xinwei Capital, Wuxi New District Investment Holding Group, and listed companies like Luxshare Precision and Zhuhai CosMX. However, as XREAL is registered in the Cayman Islands, domestic investors must complete ODI registration, expected by April 30, before funds are fully received.
Prior to this, XREAL completed eight equity financing rounds over five years, totaling 78.8344 million yuan and $244 million, equivalent to approximately 1.744 billion yuan. Its post-investment valuation surged from 40.8629 million yuan in 2017 to $700 million in 2022, a 117-fold increase. After the Series D round, valuation reached about $833 million, a modest 19.1% increase from the previous round.
The reluctance of the primary market to support high valuations reflects VC/PE exit anxiety. Pre-IPO shareholders include prominent institutions such as Sequoia China, Hillhouse Capital, Shunwei Capital, Hongtai Fund, China Growth Capital, Yunfeng Capital, NIO Capital, CICC Capital, and CPE, as well as companies like Alibaba, Kuaishou, iQiyi, SenseTime, Gentle Monster, and SeeYA Technology. Most institutional investors entered before the Series C round in 2021, having supported the company for over five years, with at least 30 institutions seeking returns through this IPO.
Related redemption clauses initially set a deadline for listing or acquisition by October 12, 2027, later extended to March 31, 2028, leaving XREAL with limited time.
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