The global market for augmented reality (AR) and virtual reality (VR) devices is poised for a significant rebound in 2025, following a challenging period in 2024 marked by economic headwinds and declining shipments.
Despite a projected 1.5 percent decrease in AR / VR headset shipments for 2024, IDC predicts 41.4 percent growth in 2025, fueled by technological advancements and more affordable devices, IDC report said.
Struggles in 2024: A Weak Economy and High Prices
The downturn in the AR/VR market in 2024 can be attributed to several factors. A weak global economy and rising average selling prices (ASPs) hampered consumer demand, while excess inventory, particularly for Sony’s PlayStation VR 2, exacerbated the situation. During the second quarter of 2024, global shipments of AR/VR headsets fell by 28.1 percent year-over-year, with total shipments reaching just 1.1 million units.
Meta led the market during this period, capturing a 60.5 percent share, followed by Sony, Apple, ByteDance, and XREAL. However, despite these declines, several industry experts expect a reversal of fortunes for the sector by 2025.
2025 Growth Catalysts: Affordable Devices and Mixed Reality (MR)
Key to the anticipated market resurgence in 2025 is the introduction of new technologies and more consumer-friendly price points. Meta is expected to play a critical role by launching a more affordable version of its popular Quest headset, allowing a wider range of consumers to experience mixed reality (MR) and virtual reality (VR) technologies. Meta’s efforts, combined with Apple’s entry into the market with the Vision Pro, are expected to drive competition, pushing prices down.
MR headsets have taken a significant leap forward in terms of fidelity and capabilities, allowing users to experience both AR and VR through a single device. This hybrid approach is likely to become more popular, with IDC forecasting that MR devices will account for over 70 percent of the market by 2028.
The Role of Artificial Intelligence and Extended Reality (ER)
Artificial intelligence (AI) is expected to play a crucial role in shaping the future of AR/VR devices. AI-driven innovations, such as improved content interaction, intuitive user interfaces, and real-time data processing, will enhance the user experience and drive broader adoption of these technologies. Additionally, consumer-friendly designs —emphasizing comfort, battery life, and seamless integration with everyday life — are expected to boost sales.
Extended reality (ER) devices, which offer simpler functionality like heads-up displays and content mirroring, are also projected to capture over a quarter of the market by 2028, catering to consumers seeking a more accessible and straightforward entry into AR/VR experiences.
Challenges for Augmented Reality
While virtual and mixed reality devices are poised for rapid growth, augmented reality (AR) remains a more challenging segment. AR headsets have faced obstacles related to production scale, battery life, thermal management, and optics. Although AR adoption is expected to grow, shipment volumes will likely remain lower than their VR and MR counterparts due to these hurdles.
Long-Term Market Outlook
By 2028, IDC predicts that the AR/VR market will grow from 6.7 million units in 2024 to 22.9 million units, representing a compound annual growth rate (CAGR) of 36.3 percent. Mixed reality headsets are expected to dominate the market, while extended reality and simplified heads-up display devices will also carve out significant niches.
The shift toward affordable, consumer-friendly devices, coupled with breakthroughs in AI and mixed reality, is expected to transform the AR / VR landscape, setting the stage for explosive growth in 2025 and beyond.
Baburajan Kizhakedath
