Australian defence and aerospace specialist, Electro Optic Systems Holdings Ltd (ASX: EOS), has emerged as one of 2025's most dramatic turnaround stories, and it may only be getting started. With shares climbing more than 240% this year, EOS is shifting from an overlooked small cap into a serious contender in global military markets.
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Why is the EOS share price surging in 2025?
A big part of the EOS story this year comes down to how quickly modern warfare is changing. The war in Ukraine and the tension between Israel and Iran have shown just how common drones have become on the battlefield, and how important it is now for militaries to be able to stop them.
That shift plays straight into EOS' strengths. The company produces everything from remote weapon stations (RWS), counter drone systems, high energy laser weapons, and technology used for tracking activity in space.
EOS is not limited to one type of product, and that gives it plenty of room to move. Its proven systems like the R400 and Slinger are still in demand, but the company is also pushing into newer areas like laser and space-based technology. As warfare continues to shift in that direction, EOS has a few different ways to keep growing at a blistering pace.
A major turning point came with a contract worth around $125 million in early August, secured from the Netherlands. The deal represents the world's first export order for a laser defence system in the 100-kilowatt class. News of the agreement sent the EOS share price soaring by more than 40% in a single session, and doubled in a matter of days.
On top of its progress overseas, EOS continues to strengthen its domestic footprint. The company is supplying RWS to the Australian Defence Force through the LAND 400 3 program, with its upgraded R400 stations set to be fitted to the new Redback Infantry fighting vehicles. The contract is valued $108 million, and deliveries are expected to run through until 2027.
The financial picture has also been moving in the right direction for EOS. In its 2025 half-year results, the company reported revenue of $44.1 million.
As of late 2025, EOS's order backlog has ballooned to around $415 million, nearly triple the level at the end of 2024. And if that's not enough, management expects full-year 2025 revenue from existing contracts to land between $115 to $125 million, with further upside if additional orders are finalised and delivered.
Why next year could be even stronger for the EOS share price
While EOS already has momentum behind it, the pipeline ahead could be even more interesting. There is the much-talked-about $500+ million contract in the Middle East that could land, along with the possibility of a second laser order on top of its recent breakthrough win.
All of this gives EOS a few different ways to keep its growth going. Based on how the company is tracking and what could happen over the next year, I think buying EOS shares could be a strong investment in 2026. Several brokers already have 12-month price targets between $8.10 and $11.18, and that is before factoring in any of these potential contract wins.
The EOS share price last closed at $4.42 on Monday.
