What happened

Shares of WiMi Hologram Cloud (WIMI -2.48%) were up 35% at 11:25 a.m. EDT on Wednesday after the company reported strong earnings results.

Revenue more than tripled year over year to RMB516 million ($79.9 million) for the first half of 2021. Net profits increased 40% year over year to RMB32 million ($5 million), even while the company significantly ramped up spending on research and development.

A person using augmented reality to visualize positions of furniture at home.

Image source: Getty Images.

So what

WiMi's revenue total in the first half of 2021 is already close to double the $45.7 million the company reported for the full year in 2019. It's benefiting from surging demand in the augmented reality (AR) industry in China, thanks to a wide range of technologies the company offers, including AR software, advertising services, payment software, and semiconductor technology. 

WiMi's recent growth spurt comes after it started offering semiconductor chips in Sept. 2020, which now represent 53% of revenue. The company credits its range of products and services for increasing its AR business customers from 175 to 298 in the first half of 2021.

Now what

The global AR industry is small but is estimated to be growing very fast, as noted by WiMi's latest earnings results. "We believe that the demand for 3D vision in Hologram AR applications is growing rapidly, which reflects the huge market potential of Hologram AR business," founder and CEO Shuo Shi said. 

Keep in mind, at a market cap of less than $500 million, investors should expect to see volatility with this small-cap tech stock, especially given the still-developing competitive landscape in the wide-open AR market, not to mention the unpredictable regulatory environment in China, where WiMi Hologram Cloud operates. But its growth potential looks substantial.

Earlier this month, the company launched WiMi HoloAR Lens, a new AR head-mounted display for the consumer market. With this product, the company is positioning for growth in the metaverse, which is another opportunity to watch for WiMi.