The Best ASX Defence Stocks
to buy Now In
May 2025

Check out our Industry Experts’ report and
analysis on the Best Defence Stocks right now on the ASX

The Best ASX Defence Stocks to buy Now In May 2025

Check out our Industry Experts’ report and analysis on the Best Biotech Stocks right now on the ASX

What Are ASX Defence Stocks?

ASX defence stocks refer to companies listed on the Australian Securities Exchange (ASX) that operate within the defence sector, supplying a variety of defence products, services, and technologies. This sector includes businesses engaged in manufacturing advanced military equipment, aerospace technology, naval ships, and providing security solutions to both Australian and overseas customers.

ASX defence companies range from aerospace specialists like Electro Optic Systems, which focuses on space defence systems, to shipbuilders like Austal, which is renowned for its contracts with the US Navy. The Australian government's defence spending drives the demand for these companies, ensuring a steady flow of contracts and funding for various defence projects.

Investing in ASX defence stocks means putting money into companies that play a crucial role in Australia’s defence capabilities and its strategic position in the global defence industry.

Why Invest in ASX Defence Stocks?

Investing in ASX defence stocks offers a unique opportunity due to the Australian government's increased defence spending and commitment to bolstering the nation's defence capabilities.

The defence sector is witnessing a surge in funding, highlighted by significant projects like the AUKUS nuclear-powered submarine program and the defence strategic review's directives for enhanced military preparedness.

Companies within this sector benefit from long-term contracts and partnerships with both the Australian and overseas governments, providing a stable revenue stream. Furthermore, the global defence market is on an upward trajectory, driven by rising geopolitical tensions and the necessity for advanced defence technologies.

ASX defence stocks, including those involved in aerospace, naval, and land systems, are well-positioned to capture this growth, offering investors exposure to a sector that contributes significantly to Australia's economic growth and national security.

Moreover, the Australian defence industry's focus on innovation, including smart sensor analytics and drone technology, presents growth opportunities in emerging technologies, making these stocks a compelling investment for those looking to benefit from Australia’s defence advancements.

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What to Look for When Investing in Defence Stocks?

When investing in defence stocks, it's crucial to consider several key factors to ensure you're making a well-informed decision. Firstly, assess the company’s contracts and partnerships, especially with governments and major defence organizations. These contracts are indicators of the company's stability and future revenue potential.

Look into the defence spending trends of the Australian government and other countries, as increased funding and priority areas can signal growth opportunities for defence companies.

Additionally, evaluate the company's involvement in innovative technologies and development projects, such as smart sensor analytics, drone technology, and aerospace systems, which are critical for maintaining a competitive edge in the defence industry.

Consider the company’s financial health and growth prospects in the context of global defence market trends and the defence strategic review outcomes. Lastly, understanding the company's role in Australia’s defence capabilities and its contribution to national security can provide insights into its importance and potential for long-term success.

3 Best ASX Defence Stocks to Buy Now in 2025


Austal Ltd (ASX:ASB)

Austal Limited is a leading Australian shipbuilding company specialising in the design, construction, and maintenance of high-performance vessels for both commercial and defence sectors. Founded in 1988, Austal has built a reputation as a global leader in maritime innovation. With shipyards in Australia, the United States, and the Philippines,the company has...


EOS Holdings Ltd (ASX:EOS)

EOS Ltd is an Australian defence company that specializes in designing and manufacturing advanced electro-optic and infrared (EO/IR) systems for military and defense applications. Founded in 1983, EOS has developed a strong reputation for its innovative technologies, particularly in surveillance, targeting, and reconnaissance systems. The company’s primary...



Droneshield Ltd (ASX:DRO)

DroneShield Ltd is an Australian defense technology company specializing in counter-drone systems designed to detect, disrupt, and neutralize unauthorized drones. Established in 2014, DroneShield quickly emerged as a leader in the counter-drone market, a niche that has seen explosive growth due to the increasing threats posed by...

3 Best ASX Defence Stocks to Buy Now in 2025

Austal Ltd (ASX:ASB)

Austal Limited is a leading Australian shipbuilding company specialising in the design, construction, and maintenance of high-performance vessels for both commercial and defence sectors. Founded in 1988, Austal has built a reputation as a global leader in maritime innovation. With shipyards in Australia, the United States, and the Philippines, delivered over 260 vessels, including military ships, ferries, and luxury yachts.

Austal’s defence offerings include the Littoral Combat Ship (LCS) for the United States Navy and the Cape Class Patrol Boats for the Australian Border Force.
Austal's recent stock performance reflects the growing demand for defence capabilities, particularly in the Indo-Pacific region, which is seeing increased military spending due to geopolitical tensions. The company has also benefited from its strong position within the U.S. defence supply chain, having been awarded numerous contracts to build advanced naval vessels.

As governments prioritise defence spending, particularly on modernising naval fleets, Austal stands out as a reliable partner. Its emphasis on cutting-edge shipbuilding technologies, coupled with its strategic positioning in key global markets, makes it a prominent player in the defence industry. Austal’s long-term growth prospects remain solid, especially as defence budgets continue to rise globally.

EOS Holdings Ltd (ASX:EOS)

EOS Ltd is an Australian defence company that specializes in designing and manufacturing advanced electro-optic and infrared (EO/IR) systems for military and defense applications. Founded in 1983, EOS has developed a strong reputation for its innovative technologies, particularly in surveillance, targeting, and reconnaissance systems.

The company’s primary offerings include high-performance turret systems, long-range cameras, and advanced sensors, which are used by defense forces across the globe for both land and naval operations.
EOS’s products are integral to modern warfare, enabling precise targeting and situational awareness in a wide range of environments. The company’s technologies are highly regarded by defense agencies worldwide, with EOS securing contracts with some of the most technologically advanced military forces.

This includes collaborations with the Australian Defense Force and international partners in NATO countries. Additionally, EOS has expanded its presence in the global defense market by continuously evolving its product offerings, incorporating artificial intelligence (AI), and adapting to new defense requirements. The company’s growth prospects are linked to the increasing global demand for advanced defense technologies, as nations look to enhance their defense capabilities in response to emerging security challenges.

Droneshield Ltd (ASX:DRO)

DroneShield Ltd is an Australian defense technology company specializing in counter-drone systems designed to detect, disrupt, and neutralize unauthorized drones. Established in 2014, DroneShield quickly emerged as a leader in the counter-drone market, a niche that has seen explosive growth due to the increasing threats posed by drones in both military and civilian environments.

The company's products, including the DroneGun and DroneSentinel, are used to safeguard sensitive locations from potential drone-based threats, such as surveillance, smuggling, and terrorist attacks.
DroneShield's counter-drone solutions are particularly valuable in conflict zones and high-risk areas, where drones are used for reconnaissance, intelligence gathering, and even delivering explosives. The company has secured contracts with various governments and defense agencies, including the U.S. Department of Homeland Security and the Australian Defense Force. DroneShield’s innovative use of AI and machine learning to identify and neutralize rogue drones sets it apart from competitors in the growing market for anti-drone technologies.

The company’s expansion plans include ramping up production to meet global demand, with a focus on establishing a strong presence in the United States and other international markets. As the drone threat continues to evolve, DroneShield’s products are poised to play a critical role in modern defense strategies.

The Future Outlook of ASX Defence Stocks

The future outlook of the ASX defence sector appears promising, bolstered by a combination of increased Australian government's defence spending, strategic initiatives, and a global push towards enhanced military capabilities. This outlook is underpinned by several key factors that suggest a trajectory of growth and innovation within the sector.

Firstly, the Australian government's commitment to raising defence spending is a significant driver. With plans to escalate defence funding to 2.3% of GDP by the end of the next decade, as highlighted by the Defence Strategic Review (DSR), the sector is poised for substantial financial injection. This increased funding is expected to support various defence projects and initiatives aimed at enhancing Australia's defence capabilities across multiple domains such as cyber and space.

Technological advancements play a crucial role in shaping the sector's future. With the Australian Defence Force (ADF) prioritizing capabilities like drone technology, smart sensor analytics, and aerospace innovations, ASX companies involved in these technology areas are likely to experience growth. The focus on developing and integrating cutting-edge technologies into the defence arsenal underscores a future where innovation is a key competitive advantage.

The emphasis on self-reliance and securing supply chains indicates a shift towards domestic production and onshoring capabilities. This move not only fosters local industry development but also opens up opportunities for ASX defence companies to partake more significantly in national and international defence contracts.

Pros and Cons of Investing in Defence Stocks

Investing in defence stocks involves several benefits and drawbacks, deeply intertwined with the defence sector's dynamics and the Australian government's defence spending. A major pro is the sector's resilience; defence stocks often exhibit stability during economic downturns, buoyed by consistent government contracts and funding.

Companies specializing in smart sensor analytics and those serving security force customers may see enhanced demand, reflecting a secure and growing revenue stream.

Moreover, technological advancements in drone technology and military vehicles cater to both domestic and overseas customers, offering growth opportunities. BAE Systems and other ASX companies involved in armour plate production or priority areas like Australia's ballistics are positioned for strategic partnerships, boosting their market prospects.

On the downside, the defence sector is highly regulated, posing entry and expansion challenges for ASX defence stocks. Ethical considerations may deter some investors, especially those concerned about contributing to militarization.

The sector's reliance on government spending and defence strategic reviews can introduce volatility, with shifts in policy or budget allocations affecting stock performance. Furthermore, the industry faces intense competition for defence contracts, and companies must continually invest in technology development to remain competitive, requiring substantial capital outlay. And finally, investors dreaming of their company being an M&A takeover target should forget about it. The recent bids for Austral (ASX:ASB) depict they are harder to happen, given the likelihood of rejection for national security reasons - even if to companies headquartered in countries not hostile to Australia.

How to Choose the Right ASX Defence Stocks

Selecting the right ASX defence stocks requires evaluating a company's financial health, its alignment with Australian defence priorities, and its technological edge. Look for companies benefiting from Australia's defence spending or those contributing to Australia's strategic defence capabilities.

Consider defence stocks with robust partnerships and contracts with the Australian government and other countries, showcasing their reliability and market trust. Assess their involvement in key defence projects, which indicate a long-term revenue stream. Finally, prioritize companies that invest in technology development and innovation, ensuring they stay ahead in the defence industry and cater to future defence needs.

FAQs on Investing in Defence Stocks

ASX Defence Stocks refer to shares of companies listed on the Australian Securities Exchange that operate in the defence sector, including those involved in manufacturing, technology, and services related to military and defence.

Our Analysis on ASX Defence Stocks

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