XREAL’s IPO filing shows fast revenue growth — but cash is running thin

XREAL (the Chinese AR company operating under the XREAL brand) told investors in its IPO prospectus that revenue climbed to 5.2亿元 in 2025, up 30.8% year‑on‑year, driven by the overseas success of its One series. But the headline growth masks a harsher reality: the company remains loss‑making, heavily hardware‑dependent and drawing on outside financing to survive. Hardware accounted for 92.2% of 2025 revenue, and more than 70% of sales came from overseas markets — a rare global footprint among China's AR startups.

Financial snapshot: improving margins, persistent cash pressure

XREAL reported adjusted net losses of 4.4亿元, 3.8亿元 and 2.5亿元 for 2023–2025 respectively, narrowing but still substantial; cumulative adjusted losses over the three years total about 10.6亿元. Gross margin nearly doubled from 18.8% in 2023 to 35.2% in 2025 as higher‑end SKUs grew, yet operating cash flow remained negative (经营活动现金净额 of 4.72亿元, 1.74亿元 and 2.03亿元 for 2023–2025) and year‑end cash stood at just 6363.4万元. A material portion of historical headline losses came from non‑cash fair‑value swings on preferred shares, warrants and convertibles — items the prospectus says will stop after listing — but underlying cash burn remains a core risk.

Product mix and strategy: One lifts revenues, NebulaOS still unproven

The One series — launched in 2024 — went from 1.35万 units to 11.14万 units in 2025 and is the primary driver of revenue and margin improvement; legacy Air sales fell sharply. Higher‑margin accessories and enterprise services exist but are still small (配件约0.7亿元，服务收入不到0.41亿元). XREAL’s in‑house NebulaOS has not become a clear monetization engine; the firm’s devices are deliberately compatible with mainstream systems, lowering barriers for users but limiting ecosystem lock‑in and subscription income.

Outlook and context: big opportunity, bigger questions

XREAL has notable backers — including Alibaba (阿里巴巴), Kuaishou (快手) and Hillhouse Capital (高瓴) — and a recent D round of $67.76 million valuing it at about $830 million. Yet the company still relies on external financing to fund operations. The broader market is also changing: 2025 has been called an inflection year for consumer smart glasses as global tech giants and established consumer‑electronics players enter the fray. Geopolitical tensions and export controls complicate hardware supply chains and access to advanced components — a background investors will watch closely. Can XREAL translate early scale into sustainable, self‑funding growth, or will it remain dependent on the capital markets to keep its AR ambitions alive?