This post is adapted from ARtillry’s latest Intelligence Briefing, XR Global Revenue Forecast, 2017-2022. It includes some of its data and takeaways. More can be previewed here or subscribe for the full report.
Many of us agree that XR will be transformative to life and business. But it’s a matter of when and how much. So ARtillry Intelligence ventured to quantify the revenue outlook in more precise terms. The result is our latest XR revenue forecast.
The high level summary is that total global XR revenues will grow from $4.2 billion in 2017 to $61 billion in 2022. That includes AR, VR, and the enterprise and consumer segments of each. Those categories are then subdivided by revenue categories like hardware, software and advertising.
So where’s that money going? The largest sub-sector is enterprise AR, which will comprise roughly 48 percent of all XR revenues by 2022. That has a lot to do with the scale achieved through wide applicability across enterprise verticals; and a form factor that supports all-day use.
Specifically, enterprise AR will grow from $671 million in 2017 to $29.6 billion in 2022, a 113 percent compound annual growth rate. This makes it the largest XR sub-sector in 2022. To get to that point, it will build slow then happen fast as we approach a tipping point around 2020.
Adoption is currently dampened by typical organizational inertia, enterprise risk aversion and sales cycles. ARtillry Intelligence believes these factors will continue to stunt enterprise AR growth but will be outweighed eventually by momentum, support and ROI realizations currently building.
The 2020 tipping point that this all leads to will be followed by accelerated adoption in a sort of enterprise herd mentality. As a historical proxy, this slow then sudden adoption could follow a similar pattern as enterprise smartphone adoption over the past decade, but on a smaller scale.
As for the composition of revenue, it will be hardware-dominant in the near term as it’s the first step in enterprise tech adoption. But software will gain share over time. As often, hardware growth creates an installed base for software, which will then dominate enterprise AR in outer years.
The other reason hardware share slows while software accelerates is replacement cycles. Enterprise hardware will mature as it’s established in the enterprise, with replacement cycles outpaced by software refresh rates. The latter will likely be sold in a SaaS manner.
Lastly, how do revenues break down by vertical? Industrial settings will lead the pack, followed by retail & commerce, corporate & finance, healthcare and education. These rankings hinge of the size of addressable market, applicability, adoption impetus and spending power.
Most of the above relates to AR’s role in operational support, such as manufacturing. But it’s also worth noting the enterprise spend for XR advertising. There, we’re pretty bearish on near-term revenue impact (see the first chart above), due to scale and ad inventory deficiencies.
This will all be a moving target and we’ll continue to size it up twice-per-year. Meanwhile, stay tuned for more data slices from this forecast, which we’ll unpack in the coming weeks. Preview more of the report here, including methodology and breakdowns of what’s included in the figures.
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Disclosure: ARtillry has no financial stake in the companies mentioned in this post, nor received payment for its production. Disclosure and ethics policy can be seen here.