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One health indicator in any tech sector is the venture funding that flows into it. XR is no exception as its venture-funding fluctuations – both up and down – map to its general health. A historical sequence of XR industry ups and downs has tracked closely with its funding inflows.
These events over the past decade include the XR industry’s circa-2017 hype cycle, subsequent correction, quick rebound, metaverse boom/bust, Covid software boom/bust, and the more recent rise of AI. XR funding throughout this period maps closely to the macro-environment.
So where are we now? After a few years of declines – mostly due to the hangover from circa-2021 “metaverse mania,” XR venture funding reached $3.53 billion in 2025 – a 117 percent year-over-year jump. Meanwhile, 2026 year-to-date funding has mostly sustained this momentum.
What’s driving this growth? This is the topic of a recent report from our research arm, ARtillery Intelligence. It joins our excerpt series, continuing in this installment with a look at XR funding’s recent history, correlation to broader macro factors, and what defines the current environment.
Historical Context
Starting at the top, 2025 XR funding was $3.53 billion, as noted. This represents a 117 percent year-over-year increase. It also follows three consecutive years of XR funding declines that were due to a more discerning investor sentiment in the wake of the metaverse boom and bust cycle.
That historical context is important in stepping back to understand the path we’re on and how we got here. During XR’s current era – starting with Meta’s 2014 acquisition of Oculus – we’ve seen a few boom & bust cycles. Fluctuations in venture funding mapped closely to these ups and downs.
The first XR boom was the circa-2017 period of elevated excitement, which led to overvaluation and oversupply that wasn’t met with equivalent demand. This caused a shakeout and market correction from 2018 to 2020. But excitement and investment quickly picked back up in 2021.
The latter was driven by the Covid software boom and the period we call “metaverse mania.” But as the metaverse failed to prove its near-term tangibility, a correction followed. This coincided with the broader correction from the Covid software boom as software valuations returned to earth.
Making matters worse, the rise of AI siphoned venture dollars away from other sectors. But AI has since shifted into more of a tailwind for XR. It amplifies its capabilities, including automating developer workflows and driving the industry’s most momentous subsegment: smart glasses.
Smaller Scale
Going one level deeper, how was that $3.53 billion in XR funding in 2025 spent? And how does it break down into classifications such as investment source, funded segments, and company stage? Those breakdowns are detailed in this report. But for now, what are the highlights?
Top funding rounds include Anduril ($2.5 billion), Xpanceo ($250 million), and VITURE ($100 million). Top categories include Hardware (End User, Primary) and Hardware (Optics & Display). Hardware generally comes first in emerging tech sectors, and XR is still in those early phases.
It’s also worth noting that the top two funding rounds in 2025 accounted for 78 percent of all XR funds invested. These are essentially outliers that – if removed from the analysis – would result in a different and smaller picture for 2025’s XR funding landscape. This isn’t great news for XR.
Lastly, to put things in perspective, XR funding is a small slice of overall funding, to the tune of .83 percent. But though it occurs on a smaller scale, XR funding closely mirrors the fluctuations and trends in the aggregate venture funding landscape, as we’ll quantify later in this report.
We’ll pause there and pick things up in the next installment with more analysis around the XR funding environment, as well as segmentations like category, stage, and deal size. Meanwhile, check out the full report for more color.