Nations around the world have been lifting their defence spending amidst a climate of geopolitical uncertainty and escalating global tensions.
For instance, earlier this year the Australian government announced plans to invest an additional $50.3 billion into the Australian Defence Force.
Global security also took centre stage at the June 2025 NATO summit where member states agreed to raise defence and security-related spending to 5% of GDP by 2035.
This new target marks a sharp increase from the previous 2% goal set in 2014.
Such commitments shine a light on defence-sector businesses listed on the ASX.
For example, two leading defence-focused exchange traded funds (ETFs) have been soaring in 2025.
Shares in the Vaneck Global Defence ETF (ASX: DFND) have climbed by 66% since the start of the year.
And the Betashares Global Defence ETF (ASX: ARMR) has also ballooned by 54% during the same period.
Then there's DroneShield Ltd (ASX: DRO), one of the best performing stocks on the ASX in 2025.
Shares in this counter-drone technology specialist have exploded by 580% since early January.
But there are other lesser-known ASX defence stock quietly making waves of their own.
Below we introduce three such companies with rocketing share prices.
Electro Optic Systems Holdings Ltd (ASX: EOS)
Electro Optic Systems specialises in electro-optical and laser technologies for the defence and space industries.
More specifically, it develops high-end defence systems such as remote weapon stations, counter-drone solutions, and space intelligence technologies.
Overall, it has been designing, manufacturing, and exporting advanced technology systems for nearly 40 years.
In August, the company announced a maiden $125 million order for its laser defence system designed to defend against drone swarm attacks.
More recently, it sealed a $108 million contract with the Australian Defence Force for its remote weapon system.
After securing new orders, the group's contract backlog now sits at about $299 million – $163 million higher than at the end of 2024
In the past six months, shares in Electro Optic Systems have surged by 418%.
Vection Technologies Ltd (ASX: VR1)
Vection develops extended reality (XR) software and services to help businesses integrate their physical and digital worlds.
It uses technologies such as augmented reality (AR), virtual reality (VR), artificial intelligence (AI), and 3D solutions to improve efficiency for its clients.
Management noted that the defence sector emerged as a structural growth driver for the business in FY25.
During the fiscal year, this it sealed about $19 million in defence contracts, including a record $7.2 million order.
Subsequently, it nailed down its largest ever contract with a $22.3 million multi-year master framework with a NATO-approved partner operating in the European defence sector.
Shares in Vection are up by 175% since mid-April.
VEEM Ltd (ASX: VEE)
VEEM designs and manufactures cutting-edge propulsion and stabilisation systems for the luxury motor yacht, ferry, commercial workboat, and defence industries.
Its products allow marine vessels to achieve higher speeds, improve fuel economy, and help lower noise and vibration.
In FY25, the group generated a total of $68.6 million in revenue, including $15.6 million from defence sales.
Management noted that defence is a fast-growing segment of the company.
VEEM recently secured a nine year Manufacturing Licence Agreement with global defence and security company Northrop Grumman.
Initially valued at US$33 million, the deal will see VEEM provide equipment into the US defence supply chain.
It builds on attaining HII-NNS approved supplier status and Level 1 accreditation which qualifies VEEM to manufacture components for the US defence system.
In August, the company also signed a six year contract valued at $65 million to continue supplying critical components for Australia's Collins Class submarines.
VEEM's share price is up by 65% in the past six months.
The post These 3 little-known ASX defence stocks are booming amidst sector-wide surge appeared first on The Motley Fool Australia.
Motley Fool contributor Bart Bogacz has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield and Electro Optic Systems. The Motley Fool Australia has recommended Veem. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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