Executive Summary
One health indicator in any tech sector is the venture funding that flows into it. It signals confidence levels from the stakeholders who have the most to gain – and lose – from it. Due to those high stakes, good investors tend to have the deepest knowledge of a given tech category. Through the process of diligence, they’re forced to know it intimately. Therefore, in the aggregate, the funding they commit to a given sector can be a reliable confidence signal. Beyond confidence, venture investing itself fuels the tech sectors that it enters – thereby accelerating growth.
The XR industry is no exception to these dynamics. Its venture-funding fluctuations – both up and down –map to its health. And a historical sequence of XR industry ebbs and flows tracks closely to its funding. These events over the past decade include the XR industry’s circa-2016 hype cycle, subsequent correction, quick rebound, metaverse boom/bust, Covid software boom/bust, and the rise of AI.
So where does all that leave us? On an upswing. After a few years of declines in venture funding, the XR sector’s aggregate venture funding grew to $3.53 billion in 2025 – a 117 percent jump over 2024.
Why the increase? Much of it has to do with AI. Initially a headwind as it attracted investment away from all other sectors, AI has become a tailwind for XR by elevating its capabilities. One particularly impactful example is the rise of AI-powered lightweight smart glasses – both display and non-display formats.
One strategic takeaway is that XR startups that can demonstrate that they operate at this intersection of XR and AI can attract investors. But the key term is “demonstrate.” XR/AI integrations must be real and robust if they’re to have an impact. Simply repeating the term ‘AI’ in pitch decks won’t work, just as dropping buzzwords didn’t work during the metaverse boom years. Investors see right through this.
But to quantify the XR funding environment more precisely, what’s driving it? How does funding break down by category, stage, and deal size? And how does XR map to the funding trends in the broader venture market? This report quantifies these variables and draws out insights from full-year 2025 XR funding.
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MethodologyARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 20 years in research and intelligence in tech sectors. This includes the past 10 years covering AR & VR as a primary focus.
This report focuses on revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory, and several other micro and macro factors that ARtillery Intelligence tracks.
This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.
Disclosure & Ethics StatementUnless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.
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