xReality Group has reported a 67% year-on-year increase in annual recurring revenue (ARR) to $7.0m in its quarterly activities update for the quarter ending 31 March 2026, alongside a new satellite office in Melbourne as it expands engineering capacity.
In the Appendix 4C and operational update released on 30 April, the company said cash receipts for the quarter were $5.6m, up 62% on the previous corresponding period, and net operating cashflow was positive at $1.3m. The company reported year-to-date cash receipts of $17.0m (up 31%) and year-to-date net operating cashflow of $3.6m (up 103%).
xReality Group said it now has 104 customers worldwide, including 95 in the United States, after adding 15 new customers during the quarter. The company attributed momentum to deployments of its Operator XR virtual reality and mixed reality training system and recurring software revenue.
The update also noted an additional upsell to the Texas Department of Public Safety valued at approximately US$0.1m, and progress on a 20-month US Department of Defence project valued at $5.6m. The company said final payments totalling $1.56m are expected in Q4 from the US DoD project, alongside a $450k Industry Growth Grant payment, excluding “business as usual” receipts.
xReality Group said it made its first mixed reality product sale to a new customer within the United States Department of Defense, describing the capability as an extension of its Operator XR platform that can complement existing virtual reality training deployments.
On product development, the company said it continued work on a counter-drone (C-UAS) simulation capability following demonstrations at I/ITSEC in December 2025 and ITEC in London in April. It also said it was advancing AI integration across its Operator XR portfolio, including personalised training scenarios and instructor augmentation.
The company reported it filled approximately 11 new positions in Australia during the quarter, mainly engineering roles, and added two customer success managers in the United States. It said the Melbourne office is intended to broaden access to engineering talent and support product delivery.
xReality Group said it operates from a ~740m² headquarters in Brookvale, NSW, which it said provides about double its previous production capacity. It also noted it repaid $575k of its Causeway Financial debt facility during the quarter, reducing the facility balance to $4.7m, with maturity on 1 April 2027.
Outside its defence and law enforcement software activities, the company said cash receipts from iFLY indoor skydiving operations were consistent with prior quarters, despite a temporary tunnel interruption in January that it said was covered by insurance. It also said the wind-down of its legacy FREAK VR entertainment venues was continuing, with FREAK Bondi Junction closed in October 2025 and the closure of FREAK Macquarie expected during Q4 FY26.
