xReality Group (ASX: XRG) has reported record full-year results, with revenue rising 43% to $20.0 million in FY26 as the company pointed to growing demand for virtual and mixed reality training in defence and law enforcement, including counter-drone training.
The company said the net loss narrowed to $0.1 million, from a $3.1 million loss in FY25, while EBITDA increased to $3.8 million from $0.6 million. Annual recurring revenue rose to $8.0 million, and deferred revenue increased to $15.5 million at 30 June 2026, up from $7.4 million a year earlier.
Operator XR, the group’s defence and law enforcement training business, grew its customer base 76% to 118 customers. XRG said Operator XR entered FY26 with a qualified sales pipeline of about $30.4 million and secured $13.0 million in total contract value during the year. The qualified pipeline was reported at $80.4 million at 30 June 2026.
Management attributed part of the year’s momentum to interest in its Interceptor counter-unmanned aerial systems (C-UAS) training product, which it said is being developed to support forces preparing for drone threats in modern conflict, border security and critical-infrastructure protection.
In international markets, XRG said it secured its first European contract through a sale of an OP-2 system to the Swedish Armed Forces via distribution partner PROMOTEQ for about $450,000, and made its first sale into Japan.
The company also said it completed a 20-month US Department of Defense subcontract in May 2026 and has since made an independent commercial sale of the resulting MR-1 mixed reality platform to a separate US Department of Defense customer.
In June 2026, Operator XR entered a memorandum of understanding with Thales Australia to jointly pursue training and simulation opportunities across defence, security and law enforcement. XRG noted the MOU does not guarantee contracts or revenue.
Operator XR’s US market remains centred on law enforcement, which the company said comprises more than 18,000 agencies. XRG highlighted a contract of up to $5.7 million secured in August 2025 with the Texas Department of Public Safety, including an initial $4.3 million order and $1.4 million in optional support services exercisable in FY28.
On investment and product development, XRG said it is continuing work across its OP-2 product line and newer offerings including Interceptor C-UAS and MR-1. The company also cited a $2.1 million grant awarded in August 2025 under the Australian Government’s Industry Growth Program to support AI and cloud development and increased manufacturing capacity, as well as security and quality certifications.
The group reported cash and cash equivalents of $2.7 million at 30 June 2026, compared with $2.8 million a year earlier, and net operating cash flow of $5.5 million for FY26. XRG said it repaid $800,000 of its Causeway debt facility during the year and has commenced discussions regarding refinancing ahead of the facility’s April 2027 maturity.
XRG said its FY26 results are in the process of being audited by Felsers, Chartered Accountants trading as Accru Felsers.
