The Future Looks Bright for Microsoft’s HoloLens Product

Microsoft (MSFT) bested over two dozen competitors to clinch a large Pentagon contract for the supply of AR (augmented reality) systems, Bloomberg reported last month. The contract is worth $480 million and requires Microsoft to supply the US Army with thousands of units of a special type of its HoloLens AR device.

The Pentagon is interested in using Microsoft’s HoloLens device for combat missions and training. The Israeli military has also purchased Microsoft’s HoloLens headsets for training purposes, according to the report.

The global enterprise market for AR systems alone was estimated to be $720 million in 2016, and it’s poised to grow to more than $30.5 billion by 2025, according to projections by Zion Market Research.

Companies competing with Microsoft for the Pentagon AR systems contract included Magic Leap, the startup backed by the likes of AT&T (T), Google (GOOGL), and Alibaba (BABA). AT&T has secured a deal to be the exclusive wireless vendor of Magic Leap’s consumer products in the United States. For AT&T, Google, and Alibaba, building a relationship with AR systems maker Magic Leap could help support their goals to diversify outside their primary industries.

Microsoft’s revenue rose 18.5% YoY (year-over-year) to $29.1 billion in the first quarter of fiscal 2019, which ended in September. Revenue rose 7.7% YoY at SAP SE (SAP) but fell 2.0% YoY at IBM (IBM) in the comparable quarter.