Elsight (ASX:ELS) Breaks New Ground, A$682K US Order Marks First Civilian Contract Win

From Battlefield to Main Street

Elsight (ASX:ELS) has secured its first commercial order in calendar year 2026 from a US public safety customer, with a purchase order value of approximately A$682k. This is an important step for the business as it demonstrates early traction beyond pure defence markets and highlights the potential to broaden its addressable market into civilian and emergency services use cases.

The momentum in the core defence segment remains strong. In Q3 CY25, Elsight delivered a record quarter with revenue of around US$9 million, representing 130% quarter on quarter growth and approximately 1,800% year on year growth.

This performance reflects a clear acceleration in defence adoption, with earlier design wins now converting into meaningful production orders. Importantly, the quarter also marked the company’s first profitable period, supported by very high gross margins across the Prodigy product suite.

Halo hardware margins reached 80%, cloud services delivered 82%, and data usage achieved 66%. For a small-cap company, margins of this quality are notable and typically signal the emergence of early competitive advantages, particularly pricing power within a specialised niche.

From an investor perspective, this combination of revenue acceleration, profitability, and margin strength suggests the business is beginning to move from validation into a more scalable commercial phase.

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Arming for Growth

As at 30 September, the company had secured approximately US$24 million in contracts and held around US$10 million in backlog. With global defence budgets rising and NATO members targeting higher defence spending as a percentage of GDP, this creates a supportive demand backdrop for companies operating in this space, including Elsight, DroneShield, and Electro Optic Systems.

Droneshields long lost cousin

The key takeaway for investors is that Elsight is showing a trajectory that is broadly comparable to DroneShield. While each company offers a different product value proposition, both operate within the same high-growth defence technology segment and have built momentum through repeat defence contract wins.

This pattern of early design wins converting into larger production orders is a familiar and encouraging signal for investors following the sector.

Looking at the company through a valuation lens, Elsight currently has a market capitalisation of roughly A$700+ million, with cumulative revenue to date of around A$14 million. Analyst forecasts imply a very optimistic outlook, with revenue expected to compound at approximately 68% per year from FY25 to FY27. If these aggressive growth assumptions are delivered, the stock could reasonably be viewed as undervalued on both revenue-based and EBITDA PEG multiples, despite the recent share price strength.

That said, defence stocks are not without risk. Revenue concentration and the timing of defence contracts can introduce volatility, particularly for companies with a limited number of large customers.

For investors considering exposure to Elsight after a strong run, it may be prudent to wait for a pullback, especially given the relatively limited analyst coverage and the inherent lumpiness of contract-driven revenue.