ASX defence shares have ripped since Russia invaded Ukraine in 2022.
That event kicked off the global defence spending megatheme.
More countries, including Australia, are now committing more funding to defence as world order splinters further.
Last year, the 32 NATO nations agreed to more than double defence spending from 2% to 5% of GDP over 10 years.
In April, Australia said it would increase defence spending to 3% of GDP by 2033 by adopting NATO's definitions of spending.
The Federal Government will spend an additional $14 billion over the next four years, and an additional $53 billion over the decade.
Since 2022, several ASX shares within the defence segment have recorded incredible share price growth.
Can they remain on the same trajectory?
In a recent article, CommSec equity strategist James Gruber said global defence spending "looks set to soar over the next decade".
But he also poses a key question for investors: how much of that is already factored into ASX share prices?
Gruber says:
That depends a lot on how much the ASX-listed businesses can continue to take market share and grow their order books in coming years, and that will depend on creating and maintaining superior technological products versus their peers.
With this in mind, let's take a look at the ratings and 12-month price target ranges from the experts.
Image source: Getty Images
Austal Ltd (ASX: ASB)
The Austal share price has ascended 97% since June 2022, and hit an all-time high of $8.82 in January.
On Thursday, Austal shares are $3.83, down 2.7%.
Austal is an Australian defence shipbuilder that builds ships for the Australian Navy, US Navy, and others.
Gruber said:
Austal has a track record as a shipbuilder for defence forces, and it could benefit from the expected ramp up in global defence spending.
One risk is that it is the only foreign-owned contractor that builds and maintains warships for the US.
If America decides that outsourcing this function to foreigners does not make sense, then Austal may be impacted.
On the CommSec platform, the consensus rating among nine analysts rating Austal shares is a moderate buy.
On the TradingView website, three analysts have a 12-month target price range of $6.60 to $7.71.
That indicates 70% to 100% upside ahead.
Droneshield Ltd (ASX: DRO)
The Droneshield share price has soared 1,288% since 2022, and hit a record $6.71 in October.
Today, the Droneshield share price is $2.78, up 0.4%.
Droneshield is a counter-drone technology systems company.
Gruber said:
It was one of the earliest companies in counter-drone technology and that first-mover advantage has helped it grow revenue from $5m in 2020 to $227m in 2025. Most of the revenue comes from military forces in the US.
It predominantly sells hardware, but a growing number is from software as a service as the company's AI software requires continuous updates.
The company has spent up to 20% of revenue on research and that has depressed profits. What net margins it may achieve in future is a key question.
Risks primarily revolve around competition, with big players in the market, including Leonardo from the UK. Besides competition, the other main risk is obsolescence, with the possibility of superior technology emerging.
Recently, the Chairman and CEO decided to step down from their leadership positions, resulting in a sharp, one-day drop in the share price.
Three analysts on CommSec give a consensus hold rating for Droneshield shares.
On TradingView, three analysts have a 12-month target price range of $2.28 to $4.80.
That suggests Droneshield shares could fall by nearly 20%, or may rise by up to 70%, over the next year.
Electro Optic Systems Holdings Ltd (ASX: EOS)
Electro Optic Systems shares are 410% higher since June 2022, and hit a peak of $12.58 in March.
On Thursday, the Electro Optic Systems share price is $9.39, down 4.2%.
The company specialises in defence technology, developing advanced weapon systems and counter-drone solutions.
Gruber said:
The company has a strong order book of $459m, up from $136m at the end of 2024. It aims to realise 40-50% of this order book in 2026.
The company is a small defence contractor on the global stage and that may be why it has continued to struggle to post underlying profits in recent years (FY25 underlying earnings were -$24m).
Nonetheless, it could benefit from the increased global spending on defence going forward.
In March, its the shares had a big drop after it was revealed that the CEO and CFO intended to sell a large portion of their stakes in the company.
Four traders on CommSec have a consensus strong buy rating on Electro Optic Systems shares.
On TradingView, four analysts have a 12-month target price range of $10.60 to $16.
That indicates about 10% to 70% upside ahead.
