Best ASX Defence Stocks 2026: Beyond Austal, DroneShield, and Codan

Every now and then, a new investment class pops up in the financial markets. Lately, that has been the defence sector for many investors in Australia and the rest of the world. Governments are increasing military spending, geopolitical tensions are high, and artificial intelligence (AI) is helping people build autonomous systems and cybersecurity tools for modern defence. As a result, investors are paying closer attention to companies developing the technologies and equipment that support national security.

Likewise, the Australian Government plans to invest hundreds of billions of dollars over the coming decade to strengthen the country's defence capabilities, including naval vessels, missile systems, drones, cyber defence and advanced manufacturing. These investments are creating new opportunities for Australian defence companies, many of which are listed on the Australian Securities Exchange (ASX). 

In this guide, we'll explain why investors are more interested in defence stocks Australia, spotlight six of the best ASX defence stocks to watch in 2026, and show you how to invest in defence stocks in Australia. 

Defence stocks are investment shares listed on the stock exchange by companies operating in the defence space. Unlike many industries that depend heavily on consumer spending, defence companies are largely supported by long-term government contracts for arms, vessels, and similar security equipment.

These contracts often span several years, providing greater revenue visibility and helping companies invest in research, manufacturing and product development. Here are some of the key reasons investors are watching defence companies ASX.

1. Rising Global Defence Spending

Defence budgets have increased significantly in recent years as governments respond to changing geopolitical situations, especially and modern security risks and challenges.

Australia, the United States and many European countries have committed to higher defence spending, supporting demand for military equipment, communications systems, autonomous technologies and defence infrastructure.

This creates opportunities for defence companies to secure long-term contracts and expand internationally, and those listed on stock exchanges further benefit from private investments. 

2. Technological Innovation

Modern defence extends well beyond traditional military equipment. These days, artificial intelligence, autonomous drones, robotics, satellite technology, cybersecurity and advanced sensors are becoming central to defence operations.

Many ASX defence stocks are developing products in these areas, giving investors exposure to technologies that also have commercial applications across industries such as mining, infrastructure and public safety.

3. Stable Long-Term Demand

Government defence programs are often planned years in advance. This provides many defence businesses with relatively predictable revenue compared with companies operating in more cyclical industries.

Although individual contracts can vary, long-term procurement programs may support earnings growth over extended periods.

4. Growing Export Opportunities

Many Australian defence companies now generate a significant share of their revenue from overseas markets. This is a result of exports to allied nations, including the United States, the United Kingdom and NATO partners, which have driven their growth and reduced reliance on domestic defence spending alone.

If you're interested in trading ASX defence stocks in Australia, Mitrade provides access to them through Contracts for Difference (CFDs). You can trade ASX defence stocks using CFDs on the ASIC-regulated platform.

Rather than purchasing the shares of these companies directly, CFD trading allows you to speculate on the price movements of leading Australian defence companies, giving you the flexibility to trade whether prices are rising or falling.

In addition to Australian shares, Mitrade also provides access to global stocks, commodities, forex, indices and ETFs through a single account.

Trade ASX Defence Stocks on Mitrade

Ready to trade top defence stocks 

• Step 1: Create a free Mitrade account via the website or mobile app and complete your identity verification. 

• Step 2: Deposit funds into your wallet using supported payment options such as credit/debot cards, PayID transfers, POLi, and e-wallets like Skrill and Neteller. 

• Step 3: Search for your preferred ASX defence stock using the search bar within the platform.

• Step 4: Analyse the market using charts, technical indicators and economic news that could impact gold prices.

• Step 5: Place your trade and use stop-loss or take-profit orders to manage risk.

If you're new to trading, consider practising with the free Mitrade demo account before trading in the defence markets on MItrade with your actual funds.

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      “Trade Defence Stocks with an ASIC-regulated broker. Fast AUD funding via PayID. ”  

Australian investors can gain exposure to the defence sector in several other ways: 

Buy Individual Defence Shares

The most direct approach is purchasing shares in individual ASX defence stocks such as Austal, DroneShield or Codan. This allows investors to target companies they believe have the strongest growth prospects, although it also increases company-specific risk.

Invest Through ETFs

Some global defence and aerospace ETFs include Australian companies alongside major international defence contractors. For instance, the VanEck Global Defence ETF (ASX: DFND) includes global aerospace and defense companies such as RTX Corporation, Thales SA and Leonardo SpA. 

This provides diversified exposure across multiple businesses and global markets while reducing reliance on any single company stock.

Australia's defence industry is relatively large, but the companies below make up a huge part of the ecosystem. 

1. Austal (ASX: ASB)

Sector: Defence Shipbuilding

Austal is one of Australia's largest defence manufacturers and among the country's most recognised defence exporters.

The company designs and builds naval vessels for customers including the Australian Navy and the United States Navy. Its portfolio includes patrol boats, high-speed support vessels and advanced warships, with major shipbuilding operations in both Australia and the United States.

Austal has strengthened its position through long-term government contracts and continued investment in advanced naval manufacturing. As Australia and its allies expand maritime capabilities under initiatives such as AUKUS and broader Indo-Pacific security partnerships, demand for naval infrastructure is expected to remain strong and impact Austal. 

Pros

• Leading Australian defence exporter.

• Long-term government contracts.

• Strong presence in the US defence market.

Cons

• Dependence on government procurement.

2. DroneShield (ASX: DRO)

Sector: Counter-Drone Technology

DroneShield is a mid-cap defence company that has become one of Australia's fastest-growing defence technology entities.

The business develops AI-enabled counter-drone systems that detect, track and neutralise unauthorised drones without causing widespread disruption. Its technology is used by military organisations, governments, critical infrastructure operators and law enforcement agencies around the world.

As drones become increasingly common in both military operations and civilian environments, demand for counter-drone technology has grown rapidly. This has helped position DroneShield as one of the most closely watched defence stocks Australia has to offer.

Beyond defence, the company's technology is also used across airports, prisons, public events and energy infrastructure, creating additional commercial opportunities.

Pros

• Exposure to a fast-growing defence technology market.

• AI-powered counter-drone solutions.

• Expanding international customer base.

Cons

• Heavy dependence on large defence contracts.

3. Codan (ASX: CDA)

Sector: Defence Communications

Codan is among the leading communications technology companies in Australia. The company has attained a large-cap status on the ASX with its operations, which relies on supplying mission-critical radio systems to military organisations, emergency services and humanitarian agencies worldwide.

Its communications equipment is designed to operate in challenging and remote environments where secure, reliable communication is essential. This makes Codan an important supplier to defence forces, border security agencies and public safety organisations.

Unlike many defence businesses that rely almost entirely on military spending, Codan also generates revenue from mining technology through its Minelab division, giving the company a more diversified earnings profile.

Pros

• Global leader in tactical communications.

• Diversified revenue streams.

• Long history of profitability.

Cons

• Competitive defence communications market.

4. Electro Optic Systems (ASX: EOS)

Sector: Defence Technology

Electro Optic Systems (EOS) develops advanced defence technologies, including remote weapon systems, battlefield surveillance solutions and space-related technologies.

Its remotely operated weapon systems are designed to improve soldier safety by allowing equipment to be operated from protected positions rather than directly on the battlefield.

Beyond defence, EOS is also expanding its presence in space technologies, reflecting the growing importance of satellite communications and space-based defence capabilities.

The company's focus on high-value defence technologies gives investors exposure to several long-term trends, including autonomous systems, precision defence and space security.

Pros 

• Exposure to advanced defence technologies.

• Growing opportunities in space and defence.

• Potential to benefit from defence modernisation.

Potential risks

• Earnings volatility due to global defence changes.

5. HighCom (ASX: HCL)

Sector: Protective Equipment

HighCom is  a relatively small company compared to competitors on our list. However, its speciality in ballistic protection equipment used by military personnel, law enforcement agencies and first responders helps it stand out. 

Its product portfolio includes body armour, ballistic helmets and personal protective equipment designed to meet demanding operational standards. Unlike companies focused on weapons systems or military vehicles, HighCom provides essential protective equipment used across a wide range of defence and security applications.

The company continues to expand internationally as governments prioritise soldier safety and modernise defence equipment, providing investors with exposure to a specialised segment of the global defence market.

Pros

• Niche position in ballistic protection.

• International sales opportunities.

• Specialist defence manufacturer.

Cons

• Smaller scale company in a competitive procurement market.

6. Quickstep Holdings (ASX: QHL)

Sector: Aerospace Manufacturing

Quickstep is another small-cap but fast-growing Australian defence-focused company. The company manufactures advanced composite components for the aerospace and defence industries. Its lightweight, high-strength composite materials are used in military aircraft and other high-performance applications where durability and weight reduction are critical.

The company works with major aerospace and defence manufacturers, providing specialised manufacturing capabilities that are difficult to replicate.

As governments continue investing in next-generation aircraft and defence platforms, demand for advanced composite manufacturing is expected to remain an important part of the aerospace supply chain. This positions Quickstep for potentially significant growth. 

Pros

• Specialist composite technology in aerospace manufacturing.

• Long-term defence programs.

• Potential export growth.

Cons

• Heavy dependence on aerospace production cycles.

You’ve probably heard the terms defence stocks and aerospace stocks used interchangeably, but they mean different things within the industry’s context. 

Defence stocks primarily generate revenue from military equipment, communications systems, weapons technologies, surveillance solutions and government defence contracts. Meanwhile, aerospace stocks focus on aircraft manufacturing, aviation components, satellites and space technologies. Some companies operate across both sectors.

For context:

For investors, the important thing is to understand where and how each company generates its revenue and the long-term projections of each business.

More countries are beefing up their security with heavy investments in national security, cybersecurity and advanced military technologies. This means that the defence sector is getting into the spectacle better than before, and they create diverse opportunities for traders and investors.

If you're looking to trade ASX defence stocks, Mitrade offers access to Australian stock CFDs with advanced charting tools, integrated risk management features and a free demo account. However, you should also consider risks such as contract timing, project execution and changing geopolitical conditions.

       

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