Tech giants rethink XR strategies as MR adoption plateaus and mobile AR accelerates

The news: Amid mounting investments in AI, tech companies’ interest in virtual reality (VR), mixed reality (MR), and augmented reality (AR) is varying significantly.

• Consumer interest in headsets is declining, leading companies such as Google and Microsoft to cancel slow-selling products.
• The number of AR and VR users is expected to keep growing, but investments may not be paying off across the board—Sony is cutting funding for its VR games and is losing interest in its PlayStation VR.

Key stats: The number of AR users in the US is expected to reach 116.0 million in 2028, up from 95.8 million in 2024, per our forecast. The number of VR users is forecast to grow to 91.3 million in 2028, from 77 million in 2024.

Accessibility and adoption: Some tech that falls under the extended-reality (XR) umbrella, including AR, can be fully integrated into smartphones and mobile apps, making it more accessible to a broad audience base and more affordable to implement.

We forecast the number of mobile AR users will grow to 99.2 million in 2028, up from 80.7 million in 2024, and represent 35% of all smartphone users.

Price advantage: Other XR applications, including MR, often need a headset for a truly immersive experience, but users may not be open to huge device investments.

• Microsoft cut production of its HoloLens 2 headset after hitting a dead end with consumer adoption, likely due to its $3,500 price tag.
• Meta’s Reality Labs division, which includes its Quest headsets and Ray-Ban Meta Smart Glasses, cost the company about $16.12 billion last year.

Less expensive, lighter-weight AR glasses are seeing a more positive reaction.

• Head-worn AR revenues are expected to grow to $5.34 billion in 2028, up from $1.86 billion in 2023, per ARtillery Intelligence.
• The second-gen Ray-Ban Meta Smart Glasses, which start at $299, sold more units over the summer than the first gen did in two years.

New competitors: Google and Samsung are diving into the XR space with Android XR and Samsung’s Project Moohan headset, moves that come as Meta and Apple struggle to capture consumer interest.

• Android XR is an open platform, which could pave the way for third-party manufacturers like Sony and Lynx to create their own devices, much like Android on smartphones.
• The Moohan headset, set for a 2025 release, may undercut Apple’s Vision Pro with a more affordable XR offering for users.

Key takeaway: With the mounting adoption of generative AI (genAI), companies may not be able to manage the costs of developing both AI models and multiple XR applications. Immersive MR’s need for costly, heavy headsets are hurting adoption, and investments could be better spent on accessible AR features in apps and social platforms.

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