Global spending in defence is increasing at a rapid rate and a number of ASX stocks stand to benefit.
But which ones should you be buying right now? Let's take a look at what Bell Potter is saying about the industry and its recommendations.
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What is the broker saying?
Bell Potter notes global defence strategy is at a structural junction, with demand for drones and counter drone solutions growing rapidly. It said:
Global defence strategy is undergoing a structural pivot, driven by the proliferation of low-cost, high-lethality unmanned systems in recent conflicts. This rise of asymmetric warfare has exposed the economic inefficiency of traditional air defence, creating an urgent mandate for "attritable" drones and cost-effective counter-measures. We view the twin themes of resilient drone connectivity and counter-drone solutions as key drivers of defence procurement for the coming cycle.
Which ASX defence stocks are buys?
The first ASX defence stock that the broker is recommending is Elsight Ltd (ASX: ELS).
However, with a price target of $2.00 and a share price of $2.65, investors may want to wait for a better entry point.
Commenting on the supplier of communication modules to drone manufacturers, the broker said:
CY25e marked a pivotal inflection point for ELS, with the company achieving profitability and delivering estimated revenue growth of 12x YoY (BPe). We enter CY26e viewing Halo as a market-leading enabler of BVLOS connectivity for unmanned systems. Accordingly, we forecast a 41% revenue CAGR over CY25-28e, driven by the rapid proliferation of unmanned systems across both defence and commercial verticals.
Another ASX defence stock that gets a big thumbs up from Bell Potter is space and defence company Electro Optic Systems Holdings Ltd (ASX: EOS).
The broker believes the massive $125 million contract award for a High Energy Laser Weapon earlier this year gives it a first-mover advantage in the market. It said:
Following the landmark A$125m award for the world's first export of a 100kw High Energy Laser Weapon (HELW) in August 2025, EOS has secured a first-mover advantage in the high-value HELW counter-drone vertical. Looking ahead to 2026, we see upgrade potential to our revenue estimates, driven by increasing global capital allocation toward counterdrone capabilities. Specifically, we anticipate the advancement of HELW contracts (>1 unit) through the sales pipeline alongside continued awards for conventional and counter-drone RWS.
Bell Potter has a buy rating and $8.10 price target on its shares. This is notably higher than its current share price of $5.01.
