5 ASX Defence Stocks to Watch After EOS Secures New Contract.

The following three ASX defence stocks are worth analysing further as they offer different exposure through its products and services in the defence industry and each company is portraying a good growth potential.

Best Performing Stocks

Electro Optic Systems Holdings Limited (ASX: EOS)

Electro Optic Systems Holdings Limited (ASX: EOS) is engaged in designing, manufacturing and exporting technology systems. It operates in two divisions, namely, Defence Systems and Space Systems. It has a market capitalisation of $1.55B.

As at 30 September 2026, the Group’s total cash holdings, including cash security deposits were $280.2M. It had an order book of $717M. EOS had a further $30M of available funding from undrawn debt facilities at 30 September 2026 and 23 October 2026. Its net cash outflow from operating activities for the quarter was $57.2M and receipts from customers were recorded at $159.1M.

EOS announced that it has secured a new order for counter-drone defence systems with the Armed Forces of a Middle Eastern nation state and is valued at US$16M. The company also secured a conditional contract with Kuwait for the provision of a nation-wide counter-drone defence system which is valued at around $700M.

On 25 August 2026, EOS announced its expected revenue for financial year 2026 to be $360M-$400M. It also continued its work on the development of a mobile demonstration capability, planned for demonstration in Europe in 2027.

Austal Limited (ASX: ASB)

Austal Limited (ASX: ASB) is a global shipbuilder and defence contractor specialising in design, construction and sustainment of commercial vessels and defence vessels. It has two main business segments, namely, Austal Australasia and Austal USA. It has a market capitalisation of $1.78B.

In FY26, Austal reported an 11% increase in revenue to $2.03B along with a 27% rise in its order book to $16.5B. At the end of the year, its net cash balance was $186.3M. Austal Australasia saw an impressive performance with a 49% increase in revenue as compared to previous year along with a record EBIT that is 137% higher than its previous best.

The company had received an indicative, non-binding and conditional offer from Hanwha Defence USA, Inc. in order to acquire Austal USA’s business entities and operations for n indicative enterprise value of US$1.05-1.20B on a cash and debt-free basis. The board and its advisors have taken this offer for further evaluation and approved Hanwha to undertake due diligence.

ASB is targeting $500M in revenue by financial year 2027. It is also focusing on technology development and innovation while increasing its defence expenditure for future growth. The company also expects its EBIT to grow in excess of 30% from the $44M reported for the segment in FY2026.

Droneshield Limited (ASX: DRO)

Droneshield Limited (ASX: DRO) provides Artificial Intelligence based platforms for protection against advanced threats to military, intelligence community, government and law enforcement and critical infrastructure and airports. It has a market capitalisation of $1.18B.

In H1FY26, DRO reported a 74% surge in its revenue from $72.3M in H1FY25 to $125.8M. with a 60% increase in its gross profit from $47.3M in prior corresponding period to $75.5M in first half of financial year 2026. It had a negative underlying EBITDA of $12.4M and its cash & term deposits were $180M, down $30M which was mainly due to investments in working capital, R&D and PP&E. The company remains debt free.

DRO also strengthened its position in the US counter-drone market with its JIATF-401 program. The company has been awarded an IDIQ procurement vehicle contract with a ceiling value of US$500M over 3 years. It also received its first order on its next generation RfRecon from Tier 1 Western European military end-user.

The company aims to deliver the FY26 revenue outlook and has stated increase in its FY2027 revenue. It currently has $29M in committed revenue for FY27 and further $17M for FY28 and beyond. The production scaling and delivery of first RfRecon orders with RfAI3 software is also on track for delivery by the end of 2026.

(Source: Company Announcements)