Extended Reality Market Trends

Growth Drivers

• Surge in industrial training and simulation applications: The manufacturing, airline, defense, and education sectors are set to drive the sales of extended reality technologies in the coming years. The extended reality solutions are gaining traction owing to the immersive simulation training that reduces operational risk and cost. In October 2024, a leading airline company, Emirates, extended its immersive virtual training platform MIRA to enable more than 23,000 cabin crews to pursue safety & emergency training. Similarly, as disclosed by the U.S. Library of Congress in June 2025, the use of XR-based products and services, including XR training environments, has become common in the national defense sector encompassing the Army, Air Force, and DOD. The use of XR training environments in integrating with live army, flight, and medical training is consistent nowadays.
• Increasing use of XR in healthcare diagnostics and therapy: The healthcare sector is estimated to propel the trade of extended reality in the coming years, as these technologies are widely used in physical therapy, pain management, and surgical training. Continuous innovations are accelerating the application of both augmented and virtual reality solutions in healthcare settings. The U.S. Department of Veterans Affairs in September 2023 reported that its initiative (VA Immersive) to expand the implementation of BraveMind, a virtual reality (VR) exposure therapy system, led to the deployment of 1450 Virtual reality Headsets across over 165 medical centers. Overall, medical settings are poised to double the revenues of key players during the forecast period.
• Rapid adoption of extended reality in retail and market: Retail businesses globally are increasingly adopting XR for marketing and advertising with the motive of driving customer experiences. XR-based products and solutions help to blend digital and physical experiences across different organizational products and services. For example, in December 2021, Nykaa adopted ModiFace, an advanced, AI-powered virtual try-on technology launched by L’Oréal. The technology consists of AI-enabled shade calibration and Augmented Reality (AR) simulation, allowing users to enable virtual try-on of beauty products on the website and mobile application of Nykaa.

Challenges

• High cost of XR hardware and pricing pressure: The production of extended reality solutions is a capital-intensive process due to the involvement of specialized components such as OLED microdisplays, spatial tracking sensors, and custom silicon chips. These raw materials add up to the final product costs, limiting their adoption in budget-constrained sectors and businesses. Tariffs on the import of electronics in different countries can lead to an increase in selling prices of XR-based products and services, which is expected to make the technology unaffordable for people with low-income status.
• Data protection regulations and compliance complexity: Stringent regulations related to data protection in different countries impose strict user consent and data residency rules. The data privacy regulations further create compliance requirements for extended reality platforms that handle sensitive biometric and spatial data. This limits the transfer of personal information across jurisdictions, hindering the adoption of extended reality solutions. Thus, strict data regulations are likely to hamper product innovation and time-to-market.