Two of the most influential ASX defence stocks released half-year results yesterday: Droneshield Ltd (ASX: DRO) and Elsight Ltd (ASX: ELS).
These companies are involved in the defence sector, which boomed on the back of tailwinds through 2025 and into 2026.
However, since then, it hasn't been all smooth sailing.
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How the tables have turned
Defence-related ASX shares surged in 2025 as investors anticipated sustained growth in global military spending.
Ongoing conflicts, strategic competition, and a growing focus on national security reinforced expectations of stronger demand for defence equipment, cybersecurity, surveillance systems, and advanced military technologies.
However, the share prices of many ASX defence stocks have reversed course in recent months.
This decline has largely reflected profit-taking and a reset in valuations after a strong rally, with investors becoming less willing to pay the high premiums built on expectations of sustained defence spending growth.
One stock hit harder than almost any other has been DroneShield shares. Once fetching over $6, DroneShield shares have come crashing back to earth in 2026.
Its stock price is down 45% year to date and is now hovering around $1.70.
Meanwhile, Elsight shares have continued to steadily grow.
Its share price is up more than 220% in the last 12 months.
Why Elsight shares are a buy
Despite moving in such different directions this year, the team at Bell Potter has similar optimism about both companies over the next 12 months.
Following the half-year results, the broker has a buy recommendation on Elsight shares along with a price target of $8.20.
From current levels, this indicates an upside potential of 42%.
We believe ELS has developed a market leading product that is leveraged to the proliferation of unmanned systems in both a defence and commercial context. We believe ELS shares offer relative value versus listed peers at 33x CY26e EV/EBIT given its recurring revenue, high ROIC business model and defensible niche.
Elsight's half-year report can be found here.
DroneShield shares a bounce-back candidate
After crashing in 2026, the team at Bell Potter believes DroneShield shares could be a value at its current price.
Following its results, the team at Bell Potter issued a new report on the company.
The broker has a buy recommendation and $2.40 (previously $2.50) price target on DroneShield shares.
From yesterday's closing price, this indicates an upside of 38%.
We expect RFRecon and new high-moat next gen products to drive continued contract wins, particularly from Europe where DRO has a leading presence in the CUAS EW vertical. Top end of CY26 revenue guidance looks achievable. Retain Buy.
