After floundering in 2017, virtual reality hardware actually outperformed optimistic sales expectations last year, SuperData Research said today, with annual VR revenues reaching $3.6 billion — higher than the Nielsen-owned firm’s late 2018 forecast of $3.3 billion. That’s a 30 percent year-over-year increase in revenues, particularly noteworthy given holiday price drops for some of the leading VR devices.

According to SuperData’s Q4 2018 XR market report, Sony’s PlayStation VR became the market leader during the holiday quarter, selling 700,000 units — the largest number of headsets sold across any category. By contrast, the standalone Oculus Go sold 555,000 units, with the PC-tethered Oculus Rift and HTC Vive selling 160,000 and 130,000 headsets, respectively.

SuperData attributes the strong sales in part to appealing prices. Between Black Friday discounts and the release of games such as Beat Saber, the PSVR ended 2018 on its strongest note yet. For $199, the easy-to-use Oculus Go appealed to first-time VR headset buyers, though the firm says consumers “craved higher-end experiences in console, PC, and standalone headsets.”

For 2019, SuperData predicts that Oculus’ next-generation standalone headset, Quest, will be a hit and forecasts sales of 1.3 million units, thanks to “high consumer interest.” While Quest will have to hurdle a somewhat challenging $399 price point and waves of recent bad publicity for Oculus parent company Facebook, SuperData believes that hardware tethering has impeded consumer VR adoption, and Quest’s better-than-Go performance will make it more compelling to consumers.

Unsurprisingly, games are the biggest revenue generator for the extended reality category, earning 68 percent of XR software revenue. Niantic’s Pokémon Go alone generated 66 percent of the $2 billion in XR games revenue, demonstrating the cash-generating power of both mobile and AR technologies under the right circumstances. Location-based VR experiences helped grow XR revenues, as well.

The future is bright for the entire XR category, SuperData suggests. When all of 2018’s hardware, software, and experience revenues are considered together, XR generated $6.6 billion in 2018, and the numbers are projected to grow steadily each year for the next four years. By 2022, the firm expects $34.1 billion in XR revenues — a 442 percent increase over 2018 — thanks in large part to growing sales of VR and AR hardware, with smaller but still substantial sales of software.