The Electro Optic Systems Holdings Ltd (ASX: EOS) share price is in the green on Thursday. At the time of writing, the shares are up 0.2% to $9.94 a piece.
So far in 2026, the shares have jumped 5.3%. And they're currently trading an enormous 735.29% higher than this time last year.
EOS is an Australian company that develops and produces advanced electro-optic technologies. The company's products are used in space information and intelligence services, in optical, microwave, and on-the-move satellite products, optical sensor units, and remote weapons systems for land, sea, and air applications.
The group's reportable segments are communication, defence, and space, but EOS generates the highest amount of revenue from its defence business. The company's defence segment is involved in developing, manufacturing, and marketing advanced fire control, surveillance, and weapon systems to approved military customers.
When compared to other booming ASX defence stocks, such as Droneshield Ltd (ASX: DRO), or even smaller players like Austal Ltd (ASX: ASB) and Titomic (ASX: TTT), the EOS share price has significantly outperformed.
Over the past year, Droneshield shares have jumped an impressive 476.47%. Meanwhile, Austal shares have surged 177.46% and Titomic shares have risen 16.28%. These are all excellent annual gains, but none are on par with EOS' huge 721% increase over the same period.
What pushed the EOS share price so high?
Surging demand for defence sector stocks comes off the back of heightened geopolitical tensions.
Ongoing global volatility, such as the recent US-Venezuela fallout, US-China potential tensions, Russia's invasion of Ukraine, and instability in the Middle East region, has prompted countries around the world to boost their spending on defence systems to protect themselves.
In fact, Global military spending reached an unprecedented US$2.7 trillion in 2024. I'd bet the figure for 2025 is even higher.
The company has seen some big contract wins, too. In December, the company announced several large new contracts for its remote weapon systems (RWS) and space systems.
EOS said it had received a new order for its R400 RWS from a North American prime contractor supplying Light Armoured Vehicles (LAVs) to an end-user in South America. Earlier in the month, the company also said it had signed a binding conditional contract to manufacture and supply a 100kW "high energy laser weapon" to a company in the Republic of Korea. The contract is worth around $120 million.
These latest contracts are just some of the many contracts that the company secured throughout the year. And it looks like there could be many more to come.
Are the shares a buy for 2026?
In my view, EOS shares are a buy for any investor interested in defence sector exposure. As ongoing geopolitical uncertainty continues to put pressure on countries worldwide, and governments step up their spending on defence systems, EOS is well-positioned to snap up some demand.
TradingView data shows that analysts have a consensus strong buy on EOS shares. The maximum 12-month target price is as high as $12.72 per share. This implies a potential upside of 28.1% for investors at the time of writing.
