Extended reality has had a complicated journey. Between 2021 and 2023 it had its first big moment in the spotlight, when Meta poured roughly $88 billion into the metaverse. That very word has now all but vanished from big tech’s communications. Does that mean the technology is dead?

Not at all. XR has simply gone through a phase of maturation and reinvention. In 2026, we are talking about a genuine productivity tool for the global economy: the market is estimated at $51.35 billion and is forecast to grow to $180 billion by 2035, at a 15% compound annual growth rate.

If you are still not entirely clear on what extended reality is and what it actually delivers in practice, this guide walks you through the basics and reviews the major investments made in recent years.

What is extended reality

Extended reality is an umbrella term covering every technology capable of mixing the physical world with digital elements. That means augmented reality, virtual reality, mixed reality, and every hybrid in between. Even regulators are now formally recognizing the category.

Italy’s 2026 Budget Law (Legge di Bilancio), for example, classifies XR as a key technology for the digital transformation of businesses, going so far as to include it in the tax incentives for so-called hyper-depreciation of capital investments.

Why is it called extended reality? Because it groups together technologies that are not trying to replace the real world, but simply to extend and enhance it.

Technically, extended reality today is being woven directly into artificial intelligence. We are no longer talking about simple overlays of digital layers, but about intelligent systems capable of understanding context, recognizing objects in real time, and adapting each experience to the actual needs of the user.

How extended reality works

Treating extended reality as a standalone technology would be misleading. To understand how XR works, it helps to break it down into the branches it contains.

Start with augmented reality, the most widespread and accessible form, available through smartphones, tablets, smart glasses, and similar devices. Augmented reality essentially overlays digital elements onto the real world. Shoppers can try on clothes and accessories virtually; technicians can see maintenance instructions superimposed on physical objects; and so on.

Then there is virtual reality, which provides full immersion in digital environments through dedicated headsets. Today 86% of large and mid-large enterprises have implemented virtual reality projects, with most reporting that they hit the targets they had set.

A third category is mixed reality, in which digital content can physically interact with the real environment. Microsoft HoloLens, still considered the leader in this segment, is the textbook example.

Which devices support extended reality

In recent years the number of devices compatible with extended reality has grown exponentially. In 2026 alone, 17 new devices have already been launched, including VR and mixed-reality headsets as well as smart glasses. The global total now sits at 95 devices.

The center of gravity has shifted to wearables: products like the Samsung Galaxy XR and the Ray-Ban Meta Display embody the move toward lighter, more discreet glasses.

Beyond comfort, companies have invested heavily on the software side. Today, measured response times in tests run between 3 and 3.5 seconds per action, while system uptime sits at 97-98%. Frame rates have doubled, supported by investments that have pushed visual resolutions to 4K.

Where extended reality is used today

To grasp XR’s potential, it helps to look at what it is actually used for right now. Start with manufacturing, especially training, field support, and product design. Technicians are increasingly using AR to access maintenance schematics, cutting both repair times and error rates.

Healthcare is another fast-growing area. XR in medicine has moved past the experimental stage: surgeons now use headsets to overlay CT and MRI data directly onto the surgical field.

In e-commerce, brands like Nike, Gucci, and IKEA let customers try products virtually, drastically cutting return rates and building confidence in online purchases.

Other sectors complete the picture: energy, tourism and entertainment, and education are all attracting heavy investment, and that flow is expected to grow exponentially in the years ahead.

Which investments have been made in extended reality

The extended-reality market is growing fast in 2026, even though the media noise has dropped sharply compared with the early hype cycle. Take Meta: in recent weeks the company has announced that its Metaverse budget for 2026 will be cut by 30%, with no further development for Horizon Worlds.

This is not a retreat. Mark Zuckerberg’s company will keep investing in XR infrastructure and is still planning to launch its Orion AR glasses within the year.

Apple continues to bet heavily on its Vision Pro, positioning it as a premium device aimed at professionals and early adopters. Microsoft is on a similar track, staying focused on HoloLens applications and the integration of its cloud services.

Google and Samsung have reshaped the entire sector with Android XR, an open ecosystem designed to democratize access to extended reality through devices that are cheaper than today’s flagships.

Finally, startups such as Finland’s Varjo keep iterating on their cloud platforms, with the goal of streaming immersive applications to any supported device.

The future of extended reality

What is next for extended reality? The defining theme will be its integration with generative AI. That will make it possible to create digital environments and characters in seconds, all highly customizable and adaptive.

The next leap will come from wearables and neural interfaces, which are increasingly opening up to medical applications. The other big focus is on AR glasses that are progressively lighter and more discreet, the real long-term prize for both Apple and Meta.

Being able to wear a device that weighs just 70 grams, doesn’t run hot, and looks like a regular pair of prescription glasses would knock down the last social barriers and accelerate mass adoption.

Editor’s note

This article was originally published in Italian on money.it by Pasquale Conte on May 16, 2026 as «Cos’è la realtà estesa (XR), tipologie e perché è il futuro del digitale». It has been translated and adapted for an international audience by the Money.it International desk.