XR enters next growth phase as 25% CAGR expected

The global XR (Extended Reality) hardware market is gaining serious momentum, fuelled by a wave of innovation across Virtual Reality (VR), Augmented Reality (AR) and emerging wearable categories. A new report from Futuresource Consulting shows that annual shipments will rise from 19 million units in 2025 to 48 million by 2029, representing a CAGR of 25% over the forecast period. And while 2024 was a slow year for XR, which grew by 6.9% despite Apple’s entrance, it also marked the beginning of accelerated investment and heightened activity from retailers and luxury brands.

AIO strong despite a short-term retreat

All-in-One (AIO) headsets continue to command the largest share of the XR market, with 12.9 million units shipped in 2024. Although a modest dip is expected in 2025, Futuresource anticipates a strong rebound as the category builds towards 24.3 million shipments in 2029. The anticipated launch of Samsung’s Project Moohan in late 2025 is expected to raise mainstream awareness and interest in premium VR, adding further momentum to the AIO segment.

For PC Virtual Reality (PCVR), shipments grew by 4% last year to reach 1.9 million units, and it’s a category that’s expected to expand at a CAGR of 17% through to 2029. Industry innovation is focusing heavily on reduced weight and improved comfort, with lighter headset designs now a critical product development benchmark.

From immersion to integration as AR gains ground

While VR has traditionally been the go-to device for immersive experiences, mass uptake has been hindered by bulk and isolation.

AR is emerging as a more practical form of extended reality. Smart glasses, which offer familiarity and social acceptance, are reinforcing this transition. In 2024, smart glasses shipments reached 1.6 million units, and Futuresource expects rapid growth to continue, supported by advances in spatial computing. Additionally, consumers can now access AR content through their smartphones, often without needing to install a standalone app.

“For everyday users, AR is carving out a natural entry point to the world of XR,” says Nikolaos Tzoumerkas, Lead Analyst at Futuresource Consulting. “While VR still holds strong appeal for immersive content, it’s AR – and in particular smart glasses – that are appealing to consumers and gaining a foothold in their daily lives. It’s that combination of familiarity, functionality and form factor that’s lowering the barrier to adoption.”

Mixed realities, clear direction

As the XR category diversifies and matures, user expectations are shifting from immersion to integration. Whether through lighter PCVR setups, more discreet AR glasses, or untethered AIO headsets, the emphasis is now on blending extended reality with everyday digital lifestyles.

“XR is no longer just about transporting people into new worlds,” says Tzoumerkas. “It’s concerned with overlaying the digital onto the physical, and enhancing tasks, communications and entertainment without the friction. We’re now entering a new phase of refinement, where use case, comfort and contextual relevance are defining category and brand success.”

To learn more about Futuresource Consulting’s Global XR Market Outlook report, visit our webpage or book a meeting with Luke here.

About Futuresource Consulting
Futuresource Consulting, established in the 1980s, is a leading research and consulting firm specialising in global market analysis, forecasts and strategic insights. With a deep understanding of emerging trends and technologies, Futuresource helps businesses navigate complex markets and make informed decisions.