Hot on the heals of the US DoD contract update with the first sale of the MR1 product, xReality has another first with the sale of the OP-2 system to the Swedish Military. The value of the contract at ~A$450k is welcome but not significant, it’s the fact this is the first sale via a distribution parter (PROMOTEQ) in Europe and to a NATO country.

We are seeing the distribution model for APAC and Europe finally getting a foot in the door. Q3 had the first sale in Japan and now in Q4 the first in Europe, the first sale is the hardest, so it is starting to look promising. 

Seeing sales via distributors in FY26 ticks another item on my watch list for xReality to achieve in FY26, which was:

• DoD contract outcome – ACHIEVED (successfully)
• Exit Entertainment - WIP
• Distributors Ex-USA: ACHIEVED (Japan + Sweden)
• Product Development: ACHIEVED (MR-1)
• Debt: WIP (net debt now down to ~$2m)

What is yet to be explained is the economics of the distributor sales. I expect this is for a couple of reasons, mainly to do with commercial confidence and the fact they are still working through this model, so a standard approach may be some time off. We can expect lower gross margins (below current 80%), but once distributor sales add scale and lower average operating cost they may help improve net margins.

It is interesting that the first sale in Europe is to a military customer rather than law enforcement and probably reflects the spending focus of governments in Europe currently (aka Ukraine & Trump trashing NATO). This may be replicated in other countries in the European market so it’s good that XRG now also has the MR-1 product available which increases use cases for military.

The momentum of this business just keeps building.

Disc: I own RL+SM