Electro Optic Systems (ASX:EOS), The MARSS Acquisition That Keeps the Re-Rate Alive

A Deal Built for the New Defence Cycle

The US defence budget has now been set at around US$1 trillion, a meaningful step up from the roughly US$800 plus billion allocated in FY25. That uplift in spending continues to flow through to defence technology providers, and Electro Optic Systems has been a clear beneficiary.

Investors who were prepared to buy the stock during earlier periods of volatility have already seen gains of more than 100%. Momentum continued today, with the share price rising a further 10% following the announcement of the acquisition of MARSS. MARSS is a Europe based defence and security technology company located near France, specialising in command and control software, sensor fusion, and AI driven systems for counter drone applications.

Against the backdrop of rising global defence budgets, the deal reinforces the company’s growth narrative and highlights why the market continues to re rate the stock.

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M&A Momentum Drives the Next Leg Higher

We view this as a highly strategic acquisition given the scale of demand emerging in counter drone systems, particularly on the software side. In effect, Electro Optic Systems is acquiring the core value of MARSS through its NiDAR C2 software platform, which functions as the AI brain of modern counter drone systems. Alongside the technology, EOS gains MARSS’ existing customer base, contracted revenues, and a team of around 80 highly specialised staff.

Critically, NiDAR is already fielded and operational, with more than 60 deployments globally. That matters. It allows EOS to bypass a long, capital intensive, and execution risky internal software development cycle. Instead, the company steps straight into a proven command and control, sensor fusion, and AI capability that can be integrated across its existing hardware platforms.

This accelerates EOS’ positioning as a more complete, software enabled counter drone provider at a time when demand is scaling rapidly across Europe and allied defence markets.

The Counter-Drone Moat

What we see as most important is that, until now, Electro Optic Systems has been strongest in hardware, namely remote weapon systems and high energy laser capabilities. What the company lacked was a battle proven, AI driven command and control layer that can integrate sensors and weapons and make decisions at machine speed. That is precisely the gap that MARSS fills.

The strategic logic is the software. MARSS’ NiDAR C2 platform can be embedded directly into existing EOS remote weapon systems, creating integrated, modular counter drone solutions that are difficult for competitors to replicate. In theory, this positions EOS to upsell into existing and future contracts, increasing revenue per system and potentially lifting margins as software becomes a larger component of the overall solution. While this uplift is not yet proven, the industrial logic is clear.

Did they buy MARSS at a good price

On valuation, the deal also looks reasonable. EOS is paying an upfront cash consideration of A$54 million, with a contingent earn out of up to €100 million, or approximately A$174 million, tied to new MARSS orders.

That structure limits downside risk while preserving meaningful upside if demand for counter drone systems continues to scale. For investors, this acquisition strengthens EOS’ competitive positioning and adds a critical software layer at a time when modern defence systems are increasingly defined by intelligence and integration, not just hardware alone.