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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry (methodology details here).

In covering spatial computing for eight years, our sector knowledge and perspective continue to expand. That occurs on several levels, including insights and access to insider information, all of which informs our forecast models and inputs. Further reinforcing that knowledge position, the daily rigors of editorial production at our sister publication, AR Insider, embolden our market insights. This also uncovers a steady flow of forecast inputs.

Beyond knowledge position and market-sizing processes, the focus of these forecasts likewise continues to evolve. Our first market forecast six years ago examined AR, VR, and all their revenue subsegments (collectively, XR). More recently, we began to produce separate forecasts for headworn AR, mobile AR, and VR. Though all these areas share technical underpinnings, their nuanced market dynamics deserve deeper and focused treatment.

Accordingly, this report focuses specifically on headworn AR. Given its unique dynamics – in both technology and user adoption patterns – it compels its own focused analysis. This allows us to go deeper into key revenue sources like consumer (B2C), enterprise (B2B) and AR-enablement software (B2B2C). We did the same earlier this year for mobile AR.

Headworn AR revenue is projected to grow from $1.86 billion in 2023 to $5.34 billion in 2028, a 23.52 percent compound annual growth rate. This trails other XR sectors we track, such as mobile AR and VR, as they’re at more advanced stages. Though headworn formats represent AR’s endgame, they’re underdeveloped today, due to highly-advanced underlying tech.

Meanwhile, there’s ample anticipation for AR glasses in the tech press and broader culture… but also a looming reality check. Futuristic visions of all-day AR glasses hit a wall given technological requirements. Not only are these needs intense – involving nuanced optical and display systems – but stylistic viability adds another layer of complexity. AR glasses’ ubiquity is more of a 2030 reality than a 2024 one. But if anything could accelerate that, it’s immense R&D spending from Apple, Meta, and others.

Zeroing in on the most influential of these players, Apple will advance AR adoption with its “halo effect,” flowing from Vision Pro. Its market impact will take several years, due to its price, but it will be influential in bringing AR to a broader segment of enterprises and consumers (in that order). Meanwhile, a new class of low-immersion smart glasses – such as Meta Ray Ban Smartglasses – shows what can be done by leaning on AI as opposed visuals and holography.

As all of the above consumer endpoints materialize, headworn AR has already found traction by helping industrial and corporate enterprises boost productivity. For example, it helps IT services field reps operate with greater speed and effectiveness through line-of-sight guidance and remote support.

Speaking of enterprise adoption, it not only happens in a B2B sense but with B2B2C. We’re talking consumer endpoints such as games, entertainment, marketing, and commerce. The technology to create and support these functions is bought by developers and brands who lean into AR as an interactive touchpoint with their customers or marketing targets. This principle is playing out in mobile AR, such as branded AR lenses, but will follow in headworn AR as the field evolves.

This progression will take a while due to low headworn AR hardware penetration, but we’ll prepare for such market opportunities by beginning to project B2B2C spending in this forecast. With evolving AR hardware from Apple, Meta, and others, B2B2C revenue models could develop in the next few years.

So how do all these principles translate to revenue projections? That’s what we’ll quantify and qualify throughout this report…

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in tech sectors. This includes the past 8 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 Statement

Unless 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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Executive Summary

How do consumers feel about mobile AR? Who’s using it? How often? And what do they want to see next? Perhaps more importantly, what are non-users’ reasons for disinterest? And how should app developers build mobile AR experiences accordingly?

These are the questions we set out to answer. Working closely with Thrive Analytics, ARtillery Intelligence wrote questions to be fielded to more than 52,325 U.S. adults through Thrive’s established consumer survey engine. As the eighth wave of this mobile AR research, the results are in and we’ve synthesized the takeaways throughout this report.

This follows several ARtillery Intelligence monthly reports that examine various segments of, and developing use cases for, consumer AR experiences that happen on smartphones. Now a deeper view into consumer usage and attitudes validates those narratives while providing new dimension into mobile AR strategies and opportunities.

So what did we find out? At a high level, mobile AR usage has grown to 35 percent of U.S. adults. Many of these users experience AR through apps, such as those built on Apple’s ARKit and Google’s ARCore. But there’s greater engagement with lower-friction experiences such as “AR-as-a-feature.”

Mobile AR users also appear active and engaged, with 46 percent reporting that they use it at least weekly. The top app category is gaming, which we attribute to Pokémon Go’s sustained traction, even after it has gone a bit quiet in terms of press attention. But other categories such as AR shopping, social interaction, and visual search continue to make headway.

Beyond the positive results and demand signals outlined on the previous page, there are negative signs and areas for improvement. For example, mobile AR non-users report low likelihood of adopting, and an explicit lack of interest in the technology.

This disparity between current-user satisfaction and non-user disinterest continues to underscore a key challenge for AR: you need to experience it to see its benefits. But there’s little motivation for non-users to do so. This creates a classic “chicken & egg” dilemma that represents a core marketing challenge for AR.

Put another way, AR’s highly-visual and immersive format is a double-edged sword. It can create strong affinities and high engagement levels. But the visceral nature of its experience can’t be communicated to prospective users through traditional marketing, such as ad copy or even video.

The same chicken & egg challenge was uncovered in the corresponding VR consumer research that we published last month. This makes it a common challenge for immersive tech, though mobile AR is relatively advantaged by smartphone ubiquity. Still, it will take time and acclimation before AR reaches a more meaningful share of the population.

Meanwhile, there are strategies to accelerate that process and to build AR apps that align with consumer affinities. And these strategies will be a moving target as AR evolves from mobile – the predominant form factor today – to its endgame: headworn. We will end this report with data that quantify the early stages of this transition from handheld to headworn AR.

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in tech sectors. This includes the past 8 years covering AR & VR as a primary focus.

ARtillery Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to more than 52,000 U.S. Adults. ARtillery Intelligence wrote this report, containing its insights and viewpoints on the survey results.

For market sizing and analysis, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in research and intelligence in the tech sector. This includes the past 8 years covering AR & VR exclusively, as seen in research and daily reporting.

Thrive Analytics likewise follows best practices in consumer research, developed over its long tenure as a consumer research firm. More details about the survey sample can be seen in this report’s introduction and more on ARtillery Intelligence research methodology can be read here.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

How do consumers feel about VR? Who’s using it? How often? And what do they want to see next? Perhaps more importantly, what are non-users’ feelings about the technology? What are their reasons for disinterest? And how can VR software and hardware developers optimize products accordingly?

These are questions we set out to answer. Working closely with survey research specialist Thrive Analytics, ARtillery Intelligence wrote questions to be fielded to 52,317 U.S. adults through Thrive’s established consumer survey engine. The results are in and we’ve analyzed the takeaways in this report.

This follows similar reports we’ve completed over the past eight years, including a corresponding consumer AR survey. Wave 8 of the research now emboldens our perspective and brings new insights and trends to light. All eight waves represent a significant sample of U.S. adults for robust longitudinal analysis. This will continue to expand with each survey wave.

So what did we find out? At a high level, 25 percent of U.S. adults own or have used a VR headset, which is the same amount reported in the previous survey wave. Though this is flat growth – which is supported by our separate VR market sizing that shows a soft VR market over the past year – there are several signs that things will pick up in the coming year.

Those signs include the emergence of mixed reality in VR. As seen in market-defining hardware such as Meta Quest 3, this involves high-definition color passthrough cameras that enable experiences that interact with the real world – or simply engender comfort, orientation, and spatial awareness in VR. This survey was fielded prior to Quest 3’s launch, but it will be something to watch going forward.

The same can be said for Apple Vision Pro. Though it’s a device we characterize in the AR hardware category, the lines are blurring, and it will have an impact on stimulating mixed reality demand, congruent with Apple’s signature “halo effect.”

But beyond those positive and optimistic signals, there continue to be challenges and adoption headwinds in VR. It hasn’t been the world-changing and revolutionary technology it was touted to be in the industry’s circa-2016 hype cycle. Since then, it has been healthy in its own right, but far narrower in its consumer adoption than proponents had hoped.

The cause of those adoption challenges is signaled in these survey results. As we’ll explore in this report, only 26 percent of respondents say that they want to try the technology. Though this is up six points from the previous survey wave – supporting VR’s near-future growth as noted on the previous page – bad news lies in the reasons for disinterest. Specifically, 82 percent of those uninterested respondents say that they’re “just not interested.” This definitive and deflating statement signals that VR proponents have their work cut out for them in converting non-users.

Moreover, the disparity between current-user satisfaction and non-user disinterest underscores a key “chicken & egg” dilemma for VR. To reach high satisfaction levels, VR must first be tried. Yet non-users, per the above, have little interest in trying it. Altogether, this presents a sizable marketing challenge for VR players and proponents to push that first taste.

But if anything is going to bring that interest to mainstream markets, it’s the aggressive pricing and quality of Meta devices. In an effort to gain an early market share lead and a network effect, Meta subsidizes its hardware to the point of deflating its own margins. The good news for consumers is that they get quality VR hardware that’s much more affordable than it should be.These factors continue to attract users, which then attract developers. As game & app libraries build in this way, a virtuous cycle – or self-propelling flywheel effect – drives the VR market forward. This is the path to VR growth. But to be clear, it has been – and will continue to be – a gradual climb. This can be seen in the live market evidence that surrounds us, further supported in the results of this survey research.

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in tech sectors. This includes the past 8 years covering AR & VR as a primary focus.

ARtillery Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to more than 52,000 U.S. Adults. ARtillery Intelligence wrote this report, containing its insights and viewpoints on the survey results.

For market sizing and analysis, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in research and intelligence in the tech sector. This includes the past 8 years covering AR & VR exclusively, as seen in research and daily reporting.

Thrive Analytics likewise follows best practices in consumer research, developed over its long tenure as a consumer research firm. More details about the survey sample can be seen in this report’s introduction and more on ARtillery Intelligence research methodology can be read here.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This exercise takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry (methodology details here).

In covering spatial computing for eight years, our sector knowledge base and perspective continue to expand. That occurs on several levels, including insight and access to insider information, all of which informs our forecast models and inputs. Further reinforcing that knowledge position, the daily rigors of editorial production at our sister publication AR Insider emboldens our market insights. It also offers an invaluable asset for market-sizing work: access.

Beyond a knowledge position and market-sizing process, the focus of these forecasts likewise continues to evolve. Our first market forecast six years ago examined AR, VR, and all their revenue subsegments (collectively, XR). We still produce that broader forecast, but also do separate forecasts for headworn AR, mobile AR, and VR. Though they share technical underpinnings, their nuanced market dynamics deserve deeper and focused treatment.

We continue to double down on that segmentation by focusing this report on mobile AR. Given its leading revenue position among AR segments, and its hardware installed base, it compels its own focused analysis. This allows us to go deeper into key revenue sources like consumer, enterprise productivity, brand marketing, and commerce enablement. We’ll do the same later this year for head-worn AR and VR.

So what did we find out in this forecast? Mobile AR revenue is projected to grow from $10.5 billion in 2023 to $21.5 billion in 2028. In fact, mobile AR revenue today exceeds other XR sectors we track, such as headworn AR and VR, as it piggybacks on a global base of 3.6 billion smartphones.

But that installed base doesn’t always translate to revenue. For example, consumer spending in mobile AR is relatively low, including digital goods such as in-app purchases in Pokémon Go. Though the game is still performing relatively well, it’s a bit of an outlier as most consumers aren’t otherwise paying for AR experiences. Those that do mostly execute in-app purchases – an established and comfort-advantaged behavior due to its firm footing in mobile gaming. But consumers largely aren’t buying AR apps.

Consumers are however buying physical goods with the help of AR. This involves AR product visualization and try-ons that add more dimension and consumer confidence in eCommerce consideration phases. This has resonated with consumers – especially the camera-native generation Z – as well as brands and retailers. These entities have meaningfully adopted AR in their marketing, as it helps them to demonstrate products with greater detail and dimension. And that’s where most spending occurs in mobile AR.

This brand adoption represents an area of AR spending we classify as B2B2C. It involves brands that utilize AR to create experiences for their customers or marketing targets. Put another way – and synthesizing a few points made so far – most mobile AR usage today is brand-sponsored rather than consumer-purchased. This same B2B2C principle applies in other categories in this forecast, such as mobile AR media & games development.

Beyond B2B2C, there’s also B2B spending in mobile AR. This mostly involves software that helps industrial and corporate enterprises boost their effectiveness or productivity. For example, AR can help IT services companies empower their field reps to operate with greater speed and effectiveness through line-of-sight guidance and remote support. This enterprise productivity use case holds the most promise in headworn AR but today remains more prevalent in mobile AR, due to smartphone ubiquity.

So how do all these principles translate to revenue? That’s what we’ll quantify and qualify throughout this report…

Price: $1999

The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO (Startup tier or higher for forecast access). You can also purchase it a la carte.

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in tech sectors. This includes the past 8 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. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

Spatial computing continues to evolve and take shape as an industry. Like other tech sectors, it has spawned several sub-segments that comprise an ecosystem. These each represent standalone topics in ARtillery Intelligence’s ongoing analysis, including monthly reports like this.

Prominent sectors so far include industrial AR, consumer VR, and other immersive entertainment. But existing alongside all of them is AR marketing. Among other things, this includes sponsored AR lenses that let consumers immersively engage with brands or virtually try-on their products.

Supporting AR marketing are several components. For example, lens creation software arms brands and developers with low-code tools to author AR experiences. Social networks like Snapchat and Instagram meanwhile offer the additional ability to amplify lenses throughout their social graphs. That paid amplification is projected to drive $4.8 billion in brand spending this year and $10.7 billion by 2027.

The factors driving this brand spending include advertisers’ growing affinity for, and recognition of, AR’s potential. Its ability to demonstrate products in immersive ways resonates with their creative sensibilities, transcending what’s possible in two-dimensional formats. There’s also a real business case. That can be seen in the performance metrics that often flow from AR marketing campaigns.

These performance metrics were analyzed in past volumes of this report series, and we now continue the narrative with another round of case studies. The goal is to explore not only the what and why of AR marketing – well-worn topics – but also the how. This takes shape in AR campaign breakdowns. What’s working and not working in these early stages while the AR marketing playbook is still being written?

Another ongoing theme carried forward in this report is how AR marketing can map to brand marketers’ varied goals. This builds on AR’s versatility and its unique ability to span the consumer purchase funnel – from upper-funnel reach to lower-funnel conversions.

Case studies in this report will accordingly span these funnel stages. Similarly, we’ll examine varied and evolving analytics. In fact, a looming question in AR marketing is what are the best metrics to track effectiveness? This will be a moving target.

As a bonus, ARtillery Intelligence has created a library of AR ad campaigns. Known as Campaign Tracker, it lives on ARtillery Pro (login required). It includes AR ad campaigns at-a-glance and in-depth. It’s meant to supplement this report with continuing education around AR marketing best practices, year-round. As always, the goal is to empower you with a knowledge edge.

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The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO. You can also purchase it a la carte.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

Spatial computing – including AR, VR, and other immersive tech – continues to alter the ways that we work, play, and live. But there have been ups and downs, characteristic of hype cycles. The pendulum has swung toward over-investment, then toward market correction – leaving us now in a middle ground of reset expectations and moderate growth.

Meanwhile, recent history has brought a few notable milestones in XR subcategories ranging from mixed reality (MR) to low-immersion smart glasses, to the sector’s new high-water mark: Apple Vision Pro.

Taking those factors one at a time, MR has been elevated to a new market standard in VR, thanks to Meta Quest 3. HD color passthrough cameras not only broaden VR use cases and user friendliness but they advance AR. In other words, AR can live on, and be incubated within, the more mature and penetrated VR hardware market. This exposes AR by seeding its demand with a broader set of new users. And that’s what Meta wants. Quest 3, among other things, is Meta’s bridge to its longer-term AR ambitions.

The same can be said for Ray-Ban Meta Smart glasses (RBMS), which accommodate style and wearability while the visual UX is toned down. Meta will approach the holy grail of all-day AR glasses from both directions – smart glasses and mixed-reality headsets – which will someday meet in the middle.

Meanwhile, RBMS sets the bar for smart glasses with an AI-powered UX whose appeal lies not in graphical dimensionality but relevant information delivery. We’re talking personal alerts, social signals, shopping & commerce, and AI-fueled object recognition.

That brings us to the big topic that’s defined the tech sector over the past year: AI. The rise of generative and conversational AI from the likes of OpenAI has characterized the technological zeitgeist. But the big question is how it intersects with XR. In short, XR can be the face of AI, while AI is the brains of XR.

For example, as we explored in a recent report, generative AI can aid in XR experience creation, thus automating and streamlining developer workflows. It can also transform user interfaces for XR devices ranging from smart glasses to mixed reality headsets. This is already seen in the AI object-recognition and personal-assistant functions of RBMS, as noted.

At the other end of the experiential spectrum, we have Apple Vision Pro. Shooting for the extent of what’s possible in spatial computing today, it could seed demand for XR by making it sexy and coveted from a mainstream perspective. This is a status that’s been elusive for AR and VR over the past decade.

This influence could take time, given Vision Pro’s price tag and long evolutionary path. But in the meantime, Apple could lift all boats through its signature “halo effect.” This unlocks opportunities for smaller players to meet XR’s elevated demands at lower price points.

Beyond user-facing products, a spatial tech stack lies beneath. This involves a cast of supporting parts. We’re talking processing muscle (Qualcomm), experience creation (Adobe), and developer platforms (Niantic). These are the engines of XR growth.

So how is all of this coming together? Where are we in spatial computing’s lifecycle? And where are there gaps in the value chain that signal opportunity for AR and VR players? We’ll tackle these questions and others in this report through numbers and narratives.

Price: $999

The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO. You can also purchase it a la carte.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

It’s that time of year again. As we enter 2024, our annual exercise kicks in: examining the AR and VR events and lessons of the past year and predicting outcomes for the next year. The following pages will do just that… But first, what’s the high-level view of where we are in the XR lifecycle?

AR and VR – collectively known as spatial computing – continue to hold immense potential. Though they don’t represent the imminent tech revolution trumpeted in their circa-2017 hype cycle, they continue to show gradual progress. After a shakeout followed that hype cycle, AR and VR are now steadily growing at measured and realistic paces.

But the “spatial spectrum” deserves more nuanced analysis as there are varying growth curves across AR and VR subsectors, as well as their convergence in a new batch of passthrough-AR-based mixed reality devices. Spending categories seeing the most traction meanwhile include AR marketing & commerce, as well as consumer VR. Meta continues to advance the latter with massive investments and loss-leader pricing for Quest 2, not to mention the much-upgraded Quest 3 – its new VR flagship and a leading device within the new mixed reality class just noted.

Speaking of Meta, one thing that characterized 2023 was the rapid deterioration of metaverse mania. This fulfilled our prediction in last year’s version of this report that the hype bubble would burst in 2023. The thinking was that the technology is several years, or even decades, from materializing. So without any immediate gratification on the horizon, the herd-mentality-driven tech press and executive-penned Op/Eds will move on to other shiny objects.

That brings us to the big topic that defined 2023 inside and outside of the spatial computing realm: AI. With the rise of underlying AI technology from the likes of OpenAI, generative and conversational AI characterized the technological zeitgeist of the past year. But the big question is how it intersects with XR.

The knee-jerk reaction to AI’s rise is that it replaces the metaverse as a source of funding and attention. And that indeed may be true. However, it’s a mistake to lump AR and VR in with the metaverse’s replacement. Indeed, AI elevates XR in several ways.* For example, XR can be seen as the face of AI, while AI can be seen as the brains of XR. They go together.

This XR/AI convergence isn’t new, as seen in flavors and subsets of XR such as visual search and 3D navigation. However, it took on new forms and areas of applicability in 2023. For example, generative AI is being developed for 3D asset creation, thus automating and streamlining XR developer workflows.

On the user end, AI brings more meaning and personalization. For example, AI plays a key role in a use case that we’re particularly bullish on: captions for the real world. This involves line of sight intelligence that makes consumers empowered and situationally aware. It has become a defining principle and North Star for AR projects underway from Meta to Apple.

But the story doesn’t end there. The XR world is broad and contains several moving parts, many of which evolved in 2023 and are now primed for 2024. For example, what will be the impact of Apple Vision Pro? How are smart glasses evolving? And how is mixed reality becoming a new standard in VR? We’ll tackle such questions throughout this report.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

June 5, 2023 was a day that the spatial computing world had been waiting for. Apple CEO Tim Cook took the stage at Apple’s annual WWDC event in Cupertino, CA to finally reveal the iconic company’s first attempt at a headworn AR device. The Vision Pro was born – the most powerful computing device Apple has built to date, and the most advanced AR headset the world has yet seen.

But despite those accomplishments, public reaction was mixed. We saw standard snickers from Apple haters and fanboys alike. The device is too bulky, doesn’t offer a compelling use case, and is way too expensive, were common refrains. That last complaint has been the most resounding. At $3,500, the price is the equivalent of a used Hyundai. The thinking goes: how will Apple fulfill its historical role in mainstreaming emerging tech if only the wealthy can buy it; and only the most ardent AR enthusiasts will want to?

In the many weeks following Vision Pro’s launch, the trolling and punditry continued, mostly from individuals who haven’t touched the device (more on that in a bit). Breathless editorials proclaimed that Vision Pro is a misguided attempt at AR glasses, and doesn’t represent the future of personal computing. Others proclaimed in certain terms that they won’t be buying the device when it releases in 2024.

But more prominent and powerful than any of these shouts from second-rate Op/Eds is the fact that Apple doesn’t care if they buy Vision Pro… This device is not for them. Rather, it’s Apple’s first play in a long game – a first-generation device meant to demonstrate what’s possible at any cost. Vision Pro will then become better, cheaper and more accessible over several generations, just like the iPhone’s evolutionary path. In other words, Apple is playing a long game.

Back to the breathless reviews from AR noobs, the majority of punditry around Apple Vision Pro has been from individuals who haven’t touched it, as noted, or those who aren’t versed in AR. The latter includes AR’s dynamics on technical and business levels; and historical perspective of what the industry and its players have (or haven’t) accomplished so far. These are important considerations in any analysis of VR hardware. In other words, be wary of assertive punditry from anyone without the above qualifications.

So why should you listen to us? In full disclosure, we haven’t worn Apple Vision Pro (yet). But we do tick the other box noted above: fluency in all-things AR. ARtillery Intelligence – and its sister publication AR Insider – have closely examined AR and the spatial spectrum since 2016. And we’ve been writing about Apple since 2001 as tech journalists and analysts.*

But that alone isn’t enough, given a lack of hands-on perspective with Vision Pro. So to scratch that itch, we’ve included perspectives and insights of trusted industry peers who were fortunate enough to demo the device under Apple’s supervision following its WWDC unveiling. We’ve peppered this report with companion videos of these hands-on reviews.

Otherwise, our analysis will focus on AVP’s market positioning rather than its specs and introductory details, which have been well covered. Among other things, we’ll apply our signature “follow-the-money” approach. This weighs Apple’s financial motivations as a primary consideration in triangulating AVP’s intended road map. We’ll tackle these questions through numbers and narratives, the goal being – as always – to empower you with a knowledge edge.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry.

The latest such effort zeroes in on VR, whose aggregate global revenue is projected to grow from $9.04 billion in 2022 to $20.3 billion in 2027, a 17.6 percent compound annual growth rate (CAGR). This puts VR in the middle of the spatial spectrum in terms of revenue rankings. It trails mobile AR, given that the latter piggybacks on $3 billion+ global smartphones. But it exceeds headworn AR, given that it continues to be challenged on technical and cultural levels.

Segmenting the above VR figures, revenue is bisected by consumer and enterprise markets. The former is larger, and driven by gaming. VR conversely has valuable but relatively-narrow use in enterprise settings due to its sensory immersion that compromises safety, social presence, and ergonomics. Exceptions include immersive training and design collaboration, where VR’s immersion is aligned and additive.

In all cases, VR’s biggest accelerant is Meta. Its Quest 2 remains competitive at sub-$500 levels. This is a central piece in Meta’s longer-term strategy to reach network effect by gaining early market share through loss-leader pricing. Though strategic and self-serving, this brings VR’s cost down in a way that benefits consumers.

To that end, one of Meta’s goals has been to reach 10 million in-market VR units – a critical mass to attract developers en masse. As resulting content libraries grow, so does the user base, thus attracting more reach-driven developers. It’s a classic flywheel effect. More importantly, Meta has surpassed that target, with signals indicating 20 million+ Quest headsets sold to date.

The remaining question is if that flywheel effect has kicked in. Will adoption accelerate in the above ways? So far, we’ve seen the opposite effect in depressed Q2 revenue for Meta Reality Labs. But these declines could be short-lived, due to a saturated market for Quest 2 as Meta prepares for its next VR inflection with the launch of Quest 3. This principle has played out across the VR landscape as the next generation of devices – built around the advantages and expanded use cases of mixed reality – penetrates the market.

In that sense, it’s not just about Meta. As we’ll explore throughout this report, there’s notable activity from Valve, Pico, Sony, and HTC. The latter has executed a notable VR comeback, establishing a strong foothold in enterprise markets, and arguably beating Meta’s VR quality standards at the high end, given its lauded VIVE XR Elite.

So how do all these principles translate to revenue projections? That’s what we’ll quantify and qualify throughout this report…

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 17 years in research and intelligence in tech sectors. This includes the past 7 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. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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Executive Summary

AI is the new black… especially generative AI such as DALL-E 2 and Midjourney. Generating artwork on the fly with text inputs seems to be blowing everyone’s minds. Similarly, conversational AI like ChatGPT continues to preview the future of information retrieval.

Some have even called this the death of the Google-dominant era of search. Though that could be overblown, there’s ample promise in the applications and endpoints for technology from the likes of OpenAI. This competitive landscape will explode in the coming years with several more players.

Amidst all that excitement, one question we’re often asked is how generative AI will converge with XR. And though it’s early in the conceptualization of generative AI, we already see several ways that the technology could merge with AR and VR to engender new functions, use cases, and points of value.

These possibilities are split between user-facing and creator-facing features. Starting with the former, generative AI could be used to create serendipitous AR experiences on the fly, based on voice prompts.

This contrasts the ways that AR and VR are experienced today which is mostly preordained. AR experiences and interactions are deliberately and painstakingly developed in advance, then experienced when activated in deliberate use cases. AI-generated XR – let’s call it “generative XR” – could be more open and flexible in creating experiences dynamically.

Similarly, with the help of generative AI, AR could evolve into more of a utility. Like search, information could be pull-based. Users could activate and observe 3D animations on demand, with possibilities from entertainment to “how-to” content (e.g., tying a tie).

As for creator-facing features, generative AI could accelerate developer workflows. This includes generating 3D models that are the ingredients for XR. Such outcomes would fill a key gap in XR’s value chain as 3D content is currently a bottleneck.

Think of this sort of like a creative assistant. During creative workflows, AI can be utilized to build rote elements of 3D environments, such as backgrounds or placeholder assets. This is similar to Meta’s concept of a ”builder bot” for 3D worlds, which doesn’t yet exist but could be a model or target.

Beyond AI’s role as a creative assistant, some AR creators are already using it as an inspirational tool. As part of their ideation process, they can prototype or storyboard AR lenses by generating artwork through tools like Midjourney. This can help them refine ideas or spark new creative directions.

Of course, the above just outlines a few ways that AI converges with XR. Other possible avenues include utilizing conversational AI (e.g., ChatGPT) for intelligent assistant functions in AR & VR headsets. Indeed, inputs that control these devices are still being conceived, so it could be an opportune time for intelligent voice assistants to emerge. These would require more capability than currently offered by Siri.

But all the above is admittedly early and speculative. Watching the convergence of AI and XR will be the fun part, which will take years to fully materialize. As we’ve learned from past tech cycles, the use cases and endpoints are discovered organically… and slowly. That said, it’s never too early to start to map out potential outcomes and opportunities. To identify and mine these opportunity gaps, the name of the game, as always, will be to maintain a knowledge edge.

Price: $999

The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO. You can also purchase it a la carte.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 17 years in tech-sector research and intelligence. This includes the past 7 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless 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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