The defence tech industry on the ASX is on a robust growth trajectory, supported by increasing global security concerns, technological innovations, and substantial investments in defence.
The global defence technology market is projected to grow from US$ 640 billion in 2023 to US$ 810 billion by 2028, at a CAGR of 4.8%.
The market for military drones is expected to reach US$ 24 billion by 2025, growing at a CAGR of 11.9% from 2020.
Countries like the United States, China, and India are leading in defence spending, contributing to over 60% of the global defence expenditure.
The Australian government has committed AU$ 270 billion over the next decade for defence capabilities enhancement, including technology upgrades.
Companies like EOS, DroneShield, XTEK, and Elsight are at the forefront, leveraging these trends to enhance their market position.
EOS, specialising in advanced optical and laser technologies, has shown steady performance with a market cap of around AU$ 250 million as of mid-2024. They also reported a 15% increase in annual revenue,driven by new defence contracts and expanded product lines. Stock showed astable growth with a 20% increase in value over the past year.
DroneShield, known for its counter-drone solutions, with a market cap of around AU$ 1 billion. Experienced a 35% surge in stock price due to rising demand for anti-drone solutions from military and commercial sectors.They also reported a revenue increase of 25% year-on-year, highlighting the growing demand for its products.
Increased focus on research and development, with companies like EOS and DroneShield investing 10-15% of their annual revenue into R&D to stay ahead in innovation.
XTEK, offering tactical and protective solutions, has expanded its global footprint, contributing to a 30% rise in its stock price over the past year. They also expanded their operations in North America and Europe.
Elsight, offering secure communications and data transmission technology with a market cap of around AU$ 80 million. Reported a 20% increase in revenue over the past year, driven by growing demand for its unique communications technology. Also had a positive stock performance, with a 25% increase in stock price over the past year due to successful product deployments and new contracts.
Elsight recently integrated with the Indago 4 drone built by US aerospace firm Lockheed Martin under a strategic collaboration exercise to complete beyond visual line-of-sight flights.
The Indago 4 is a backpackable, electrically powered and rapidly deployed uncrewed aerial system purpose-built for vital missions, with a capabilities suite designed for military and security forces applications.
Future outlook
Australian companies are forming strategic alliances with global defence giants, enhancing their market reach and technological capabilities. Continued government support and contracts are poised to provide a stable revenue stream for these companies.
Nations worldwide are increasing their defence budgets, with a focus on modernising military technology.
Australia's ongoing commitment to bolstering its defence capabilities will drive demand for local tech solutions.
Integration of AI and machine learning in defence systems is expected to revolutionise threat detection and response capabilities, with a significant expected growth in autonomous vehicles and drones for surveillance and combat roles.
These trends underline the robust growth and investor interest in the defence tech sector on the ASX, driven by innovation and increasing defence budgets globally.
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