Top 5 ASX Defense Stocks in 2026

For investors who want exposure to the defence sector in 2026, these five ASX defence related stocks stand out as some of the most compelling opportunities.

DroneShield Limited (ASX: DRO) 

DroneShield Limited  reported a record FY2025 as revenue from customers jumped 277% year-on-year to $216.5 million which makes it the strongest revenue year in the company’s history.
Customer cash receipts increased 256% to $201.6 million and SaaS revenue rose 312% to $11.6 million which shows the rising share of software and recurring income within the overall business mix.

The company delivered its most profitable half year so far with $5.2 million profit before tax and posted positive operating cash flow of $23.3 million for 2025 which marks a major shift from the previous year.

DroneShield’s sales pipeline now stands at $2.09 billion across more than 300 projects worldwide across military and civilian markets while manufacturing capacity is set to expand from $500 million per year to $2.4 billion per year by the end of 2026.

Electro Optic Systems Holdings Limited (ASX: EOS) 

Electro Optic Systems Holdings Limited reported a net operating cash inflow of $19.3 million for the December 2025 quarter which is a sharp reversal from the $34.3 million outflow in the previous quarter, helped by customer receipts of $77.3 million.

Total contract backlog increased to $459 million at year end which represents a 238% rise year-on-year and has strong demand for Remote Weapon Systems and High Energy Laser Weapons across the United States, Europe, Asia and the Middle East.

During the quarter, EOS secured key contracts which include a $108 million LAND 400-3 project award with Hanwha Australia, a €11.4 million counter drone contract with a NATO customer and a US$22 million agreement with General Dynamics Land Systems.

Cash and cash equivalents were $106.9 million at quarter end with no borrowings which gives the company solid support to execute its growth plans.

Codan Limited (ASX: CDA) 

Codan Limited on 9 January 2026 announced that it expects FY26 first half group revenue of about $394 million which represents 29% growth year-on-year while underlying net profit after tax is expected to be at least $70 million which is up around 52% year-on-year.

The metal detection segment reported revenue of nearly $168 million which increased by about 46% mainly due to strong gold detector sales in Africa along with solid growth across recreational markets.

The communications division, recorded revenue of roughly $222 million which rose by around 19% and is at the upper end of its 15% to 20% growth target range. Communications was the standout performer, delivering 26% revenue growth, with segment profit 
up 34%. Defence is now 38% of Communications revenue, reflecting its continued focus on long term, high-value markets such as unmanned systems and soldier-worn technologies.

Austal Limited (ASX: ASB) 

Austal Limited is a global shipbuilder and defence contractor focused on the design, construction and support of commercial and defence vessels.
On 19 December 2025, the company secured a contract extension to build two additional Evolved Cape Class Patrol Boats for the Australian Border Force which is valued at more than $135 million.
The current market capitalisation stands at $2.68 billion and for FY25 the company reported revenue of $1.8 billion which represents growth of 24.1% compared to the prior year while NPAT came in at $89.7 million.

Austal also announced on 18 December 2025 that it was awarded a $1.029 billion Design and Build contract for the Landing Craft Medium program with construction of the first vessel expected to start in 2026 and management expects EBIT of $135 million for FY26.

Elsight Limited (ASX: ELS) 

Elsight Limited delivered a transformational CY25 performance as annual revenue reached US$22.8 million which marks an 11-fold rise year-on-year alongside US$32.8 million in cash receipts and positive operating cash flow of US$19.8 million.

The company finished the year profitable and cash flow positive with US$59 million in cash which provides a strong base to expand operations through 2026 without the need for additional capital expenditure.

Gross margins are highly attractive with around 76% on Halo hardware sales, about 66% on data usage revenue and targets close to 90% for recurring cloud services which reflects a scalable and capital light business model.

Elsight has secured US$22 million in contracted backlog to be delivered in the first half of 2026 while its broader pipeline of realizable opportunities stands at US$137 million which will support rapid growth in future.

(Source: Company Reports)