On the early morning of April 2nd, AR glasses company leader XREAL Ltd. (formerly Nreal) submitted a listing application to the Hong Kong Stock Exchange, with joint sponsors being China International Capital Corporation and Citigroup.
As the first domestic and global company to sprint for an IPO on the Hong Kong stock market, XREAL is expected to become the "world's first smart glasses stock" once the hearing is completed.
However, compared to the perceived high revenue, gross profit, and high valuation of AI hardware, XREAL admitted in its financial report that it is facing huge losses.
According to the prospectus, XREAL's annual losses from 2023 to 2025 were RMB 882 million, RMB 709 million, and RMB 456 million respectively, with a cumulative loss of over RMB 2 billion over the past three years; The net losses after deducting non recurring expenses were 437 million yuan, 375 million yuan, and 250 million yuan, respectively, with a cumulative total of over 1.05 billion yuan.
Moreover, XREAL's operating cash flow continues to be negative, with a recent valuation of only $833 million (approximately RMB 5.7 billion), even less than the unicorn level of $1 billion.
Obviously, this XREAL IPO has opened the industry foam in the AI glasses boom: an AI hardware race track with constant losses and a gross profit margin as low as 30%.
Overseas revenue accounts for 71%, with a huge loss of 2 billion yuan in three years
In the past three decades, personal computing platforms have experienced three important evolutions, namely the personal computer (PC) era with graphical interface (GUI) and keyboard and mouse as the core human-computer interaction paradigm, the Internet era with multi touch and application ecology as the core, and the spatial AI era with multimodal understanding and AI enabling collaboration as the core.
The evolution of each generation of computing platforms is accompanied by structural changes in interaction methods, while giving rise to new hardware forms and ecosystems.
In the early days of the computing era (including the PC era and the Internet era), users actively gave instructions through screens, applications and input devices to interact with digital systems.
On the other hand, the next stage of computing is shifting from capturing attention to perceptual interaction; In this mode, the device needs to instantly perceive the environment, visual and voice inputs, and support more collaborative and context oriented execution.
With the continuous development of AI capabilities, human-computer interaction is expected to break through single point instruction input and move towards more continuous, multimodal, and adaptive forms of interaction.
XREAL, founded in 2017 and registered in the Cayman Islands with exemption, was once a leader in the field of AR glasses, positioning itself as a combination of AR optics, spatial computing, and chip systems. Its core technologies include self-developed X-Prism optical engine, customized X1 side co processor, self-developed Nebula OS system, and the world's first autonomous production base for AR optical modules.
In the past two years, with the AI boom, XREAL has entered the AI smart glasses race, competing with Star Meizu, Thunderbird Innovation Rokid、 Yingmu Technology is referred to by the media as the "Five Little Dragons of Smart Glasses".
XREAL believes that the AR and AI eyewear industries face huge market opportunities:
In the smart head mounted device market, from 2021 to 2025, the market revenue will grow from 4.6 billion US dollars to 5.1 billion US dollars, with a compound annual growth rate of 2.4%. Driven by a mature supply chain that is lightweight, easy to operate, and compatible with smartphones, the annual compound growth rate of sales revenue for smart glasses during the same period was as high as 77.3%. On the contrary, the compound annual growth rate of XR headsets is negative, reaching -10.7%. The fundamental reason for the decline in growth is its bulky design, high price, and limited practical application scenarios for consumers.
In addition, the augmented reality (AR) glasses market has become the fastest-growing part of the global smart glasses market. From 2021 to 2025, the sales revenue and sales volume of AR glasses reached a compound annual growth rate of 41.3% and 48.9% respectively, while the global smart glasses market is expected to reach a size of 2.3 billion US dollars by 2025.
It is expected that by 2030, the global smart glasses market will exceed 118 million units and sales revenue will exceed 24 billion US dollars; Among them, the sales of AR smart glasses are expected to reach 22.2 million units, and the sales revenue is expected to reach 9.4 billion US dollars.
Among them, as the global leader in the AR glasses industry, XREAL has been ranked first in global sales revenue for four consecutive years from 2022 to 2025; In 2025, the global revenue market share of AR glasses (AR+no display) is 27.0%, and the sales market share is 24.8%, both ranking first.
In addition, by 2025, the global AR glasses market share will be 27.0%, with the top five brands accounting for a total of 80.3%. XREAL will take the top spot, while Meta and Ray Ban's joint AI glasses will rank fifth.
As the founder and chairman of XREAL CEO、 Executive Director, Xu Chi, 41 years old, graduated from Zhu Kezhen College of Zhejiang University with a bachelor's degree and obtained a PhD from the Department of Electronic Engineering at Mingni Suda University Shuangcheng Branch. He has worked at NVIDIA and Magic Leap, participated in the research and development of optical display technology, was a senior algorithm engineer at Magic Leap, and was an early core member of the spatial vision algorithm team.
In 2017, Xu Chi returned to China and founded XREAL, proposing core ideas such as "AR will be the next generation computing platform".
In terms of revenue, XREAL's total revenue for 2023, 2024, and 2025 will be 390 million yuan, 394 million yuan, and 516 million yuan, respectively; The gross profit margins are 18.8%, 22.1%, and 35.2%, respectively; The net losses were 882 million yuan, 709 million yuan, and 456 million yuan respectively; Overseas income accounts for 65.3%, 65.9%, and 71.0%.
In addition, over the past three years, research and development expenses were 216 million yuan, 204 million yuan, and 183 million yuan respectively, and operating cash flows were -472 million yuan, -174 million yuan, and -203 million yuan respectively.
Overall, XREAL's revenue continues to grow, gross profit margin slightly improves, and net loss significantly narrows, but it has not yet achieved profitability and there is a risk of sustained losses.
XREAL stated that the net losses during past performance periods were mainly caused by the following factors:
(i) The fair value changes of preferred shares, warrants, and convertible notes will reach RMB 438.7 million, RMB 328 million, and RMB 202.6 million in 2023, 2024, and 2025, respectively. These are non cash in nature and will no longer be generated after the completion of the compilation;
(ii) The research and development expenses incurred to maintain our technological leadership in optical engines, end side coprocessor architectures, algorithms, and operating systems will reach 215.9 million yuan, 204.2 million yuan, and 182.9 million yuan in 2023, 2024, and 2025, respectively;
(iii) Sales and distribution expenses related to global market education and channel construction for emerging AR glasses categories will reach 214.1 million yuan, 143.1 million yuan, and 130.9 million yuan in 2023, 2024, and 2025, respectively. Our total operating expenses (including sales and distribution expenses, administrative expenses, and research and development expenses) as a percentage of revenue have decreased from 137.6% in 2023 to 82.7% in 2025, demonstrating a significant operational leverage effect.
Among them, XREAL has entry-level Air series, One series, Light Ultra Aura series, etc. In addition, in 2026, XREAL will also release products such as ROG XREAL R1 (game co branded), Project Helen (entry-level), and Project Aura (Google Android XR flagship), targeting the global smart glasses market.
In 2025, XREAL sold over 132000 units, with a sales network covering 40 countries and regions. Last year, overseas revenue accounted for over 70%, with the United States (36.9%), Japan (14.6%), and Europe (13.8%) as core markets; Direct sales account for 70.8%, while distribution accounts for 29.2%; The company's strategic partners include Google, Bose, Sony, Asus ROG, and others.
With a financing of 3.1 billion yuan and a valuation of 5.7 billion yuan, Kwai, Ali and Sequoia have entered the market
Since its establishment in 2017, XREAL has completed dozens of rounds of financing, with a total cumulative financing amount of approximately $433 million (RMB 3.1 billion).
The company's investor lineup is luxurious, including Alibaba, Kwai, Weilai Capital, Yunfeng Fund, Sequoia China Gentle Monster、 Hillhouse, Hongtai, Zhongjin Capital, Jinpu Investment, Shunwei Capital, CPE Yuanfeng, Huachuang Capital, iQiyi, etc.
2020: B1 round of 40 million US dollars
2021: Series C exceeds $100 million
2022: $60 million in Series C+(led by Alibaba)
2024: Strategic financing of $60 million
2025: Pudong Venture Capital 200 million RMB
January 2026 (latest round before IPO): $100 million, post investment valuation of $830 million.
According to the prospectus, the largest shareholder of XREAL is Xu Chi and its controlling entities, holding a total of 27.98% of the voting rights and maintaining a controlling position after listing. Xu Chi is the single largest shareholder of the company and the core controller of the group.
As of the end of 2025, XREAL's post investment valuation is approximately $830 million, or about 5.7 billion yuan.
Summary
It took nine years, and this morning, XREAL finally knocked on the Hong Kong stock IPO.
However, this is a bloody IPO listing and still faces severe challenges.
The prospectus also discussed the lawsuit between VITURE and the company before the IPO:
XREAL is currently filing a patent infringement lawsuit against its competitors, and the case is still under review; The company also has the potential risk of being sued by third parties for intellectual property, product liability, contracts, etc., but as of the date of issuance of the prospectus, there are no pending major lawsuits or arbitrations that have a significant adverse impact on the company.
The prospectus clearly states that this dispute belongs to the category of conventional patent wars in the industry and does not constitute a significant adverse impact, but it is a risk matter that must be disclosed.
At the same time, there are also risks associated with intellectual property, such as bans, production shutdowns, sales bans, huge compensation, product modification costs, etc. The company may not be able to fully protect/enforce intellectual property globally, and may be accused of infringement by third parties, leading to other potential litigation issues, product liability claims caused by product quality/after-sales, regulatory penalties and civil claims caused by data privacy and information security incidents, contract disputes between suppliers, distributors, and partners, labor/equity disputes among employees, shareholders, and related parties, etc.
At present, the top five suppliers of XREAL account for nearly 30% of the procurement amount, with the largest supplier accounting for over 12%. Core optics, chips, and screens are highly dependent on external supply. If there is a supply interruption, price increase, delay, or quality issue, it will directly affect production and delivery. Our independent production line only covers optical modules, and the assembly of the entire machine still relies on third parties.
In addition, currently XREAL meets the dual listing test of Hong Kong Stock Exchange's earnings and market value, and has obtained three key exemptions: management stay in Hong Kong exemption, no need for two executive directors to reside in Hong Kong; Exemption for joint company secretaries, allowing individuals without Hong Kong professional qualifications to serve as joint secretaries; Exemption from disclosure of equity incentives simplifies detailed disclosure for 249 incentive recipients, and the company has completed VIE restructuring and Pre IPO financing.
In this IPO, XREAL raised funds for continuous research and development investment (technology and product upgrades), global brand building+sales channel strengthening, self built production lines and capacity upgrades, internal system upgrades, improving operational efficiency, as well as working capital and general enterprise purposes.
