The Revival of the Extended Reality Industry
The extended reality (XR) industry, which includes virtual reality (VR), augmented reality (AR), and mixed reality (MR), is gaining momentum again. After a period of stagnation following the burst of the metaverse bubble during the COVID-19 pandemic, XR is now recognized as a next-generation platform driven by real demand in AI, smart glasses, and industrial simulations. Meta, formerly Facebook, is at the forefront of this shift.
Despite earlier overhype and skepticism about the metaverse, Meta has stayed committed to integrating artificial intelligence (AI) with XR technologies. This approach is now producing tangible results, attracting renewed market interest and investment.
Understanding XR Technologies
- Virtual Reality (VR): Immerses users fully in a digital environment, disconnecting them from the real world. Typically experienced through 3D headsets.
- Augmented Reality (AR): Overlays digital information onto the real world using devices like smartphones or glasses, enhancing the user’s perception of reality.
- Mixed Reality (MR): Allows virtual objects to interact in real time with the physical world, enabling natural positioning and interaction between both.
- Smart Glasses: Devices combining AR and MR functionalities to blend reality with virtual experiences.
Market Outlook
According to Mordor Intelligence, the global XR market, encompassing hardware, software, and services, is projected to grow from $7.55 billion in 2025 to $44.14 billion by 2030, with an annual growth rate of 42.36%. AR currently makes up 43.2% of this market and is expected to maintain strong growth.
XR is moving beyond gaming and entertainment, finding applications in healthcare, manufacturing, education, and defense. After the initial hype around the metaverse faded, XR is now focused on practical, AI-driven uses in real-world scenarios.
Omdia projects XR device sales to hit 61.5 million units by 2035 and exceed 200 million by 2045. MR glasses, anticipated to enter the market around 2032, are expected to become a key device category. AI-enabled smart glasses are gaining attention as potential successors to smartphones, with widespread adoption expected by the early 2030s.
Meta’s Strategy and Market Response
Meta leads global tech companies in XR investment. In its recent earnings report, Meta posted $47.52 billion in revenue and $18.34 billion in net income for the second quarter, increases of 21.6% and 18% year-over-year respectively. The company views AI as integral to its advertising revenue and a core component of XR development.
While Meta’s Reality Labs, the division developing AR/VR hardware, reported a $4.53 billion quarterly loss, it remains classified as a “long-term core business.” This underscores Meta’s commitment to XR despite short-term costs.
Andrew Bosworth, Meta’s CTO, noted at the Bloomberg Tech Summit that this year marks a turning point for AR and VR markets. He emphasized that AI smart glasses are making strong impressions on consumers and competitors alike, predicting visible results by year-end and validation of value within five years.
Meta’s CEO, Mark Zuckerberg, has outlined ambitious plans to build large AI data centers named Hyperion and Prometheus. The company also established the Meta Super Intelligence Lab, combining teams from FAIR, Llama, and product units, with talent sourced from OpenAI and DeepMind. This lab focuses on advancing Artificial General Intelligence (AGI) alongside XR technologies.
Smart Glasses and the Future of Computing
Meta is investing heavily in smart glasses by acquiring a 3% stake in EssilorLuxottica, owner of brands like Ray-Ban and Oakley. Ray-Ban smart glasses have sold over 2 million units since launch, establishing a foothold in consumer markets. Recently, Meta unveiled AI-powered smart glasses under the Oakley brand, and introduced a prototype called “O-Ryan” featuring 3D projection micro lenses.
Meta positions these wearables as more than mobile device replacements—they are seen as gateways to the metaverse.
The company’s metaverse platform, Horizon Worlds, is evolving to combine AI avatars, generative chatbots, and a creator economy. Users access the platform through smart glasses and XR devices, while generative AI automates content creation and product curation. Creators can monetize their virtual spaces, with AI managing operations. Meta aims to build a digital economy where digital humans, spaces, and assets interact seamlessly.
Market Impact and Outlook
Following Meta’s latest earnings announcement, its stock price jumped over 11% in after-hours trading. The company also raised its capital expenditure guidance for the year, reflecting confidence in AI infrastructure and the smart device ecosystem.
Zuckerberg forecasts that smart glasses will replace smartphones as the primary personal computing device in the AI superintelligence era. He compared current technological shifts to historical changes that freed people from survival-focused labor. Zuckerberg emphasized that personalized superintelligence will help individuals understand and achieve their goals.
He also highlighted the critical five-year window ahead for AI technology, which will determine whether AI enhances human capabilities or replaces societal functions.
Executives and strategists should track how AI and XR converge, as these technologies are set to redefine personal computing and digital interaction. For those interested in deepening knowledge in AI and related technologies, exploring specialized courses can provide practical insights into this evolving market.
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