Electro Optic Systems (ASX: EOS) reported a record first-half 2026 profit on Tuesday, driven by surging demand for counter-drone systems amid escalating global conflicts.
The Australian defense contractor posted revenue of $168.8 million for the six months ended June 30, a 283% increase from $44.1 million in the same period of 2025. Underlying earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $21.6 million from a loss of $14.9 million a year earlier. Gross margin compressed to 58% from 76% due to the absence of prior one-time contract benefits.
Defense systems revenue, the company’s core segment, jumped 322% to $163.7 million, while the statutory net profit after tax remained negative at $33.7 million—a $11.1 million improvement from the prior period. The result was impacted by a $34 million fair value remeasurement of contingent consideration related to the May acquisition of MARSS Group and $10.2 million in acquisition costs.
The MARSS deal, valued at $51 million in upfront cash, has contributed approximately $200 million in orders during 2026 alone. A £85 million (~A$160 million) contract signed with a Middle Eastern military customer in May accounts for roughly 70% of the expected revenue and cash flows in 2026 and 2027. EOS also secured a $175 million counter-drone contract in June and a €71.4 million (~A$125 million) high-energy laser weapon (HELW) contract with the Netherlands Ministry of Defence.
The company’s unconditional order book expanded 84% from December 2025 to June 2026, reaching $846 million, with the Middle East representing 55% of the total. First-half contract signings totaled $303 million across 10 orders, compared with $75 million in the prior-year period. Cash flow improved as customer receipts rose to $138.9 million, while operating cash outflow narrowed to $8.1 million.
EOS raised $200 million in equity capital in June and drew an additional $70 million from its term loan facility, boosting unrestricted cash to $256 million at the end of June. Total available liquidity stood at approximately $286 million, including a $30 million undrawn portion of the $100 million facility. A subsequent $30 million equity raise in July lifted the post-period cash position to roughly $316 million.
The company maintained its full-year 2026 revenue guidance of $360 million to $400 million, including contributions from MARSS. EOS also highlighted a pipeline of opportunities exceeding $1.5 billion, including a German vehicle protection tender valued at approximately $700 million and multiple HELW programs each exceeding $200 million.
The surge in demand reflects broader trends in modern warfare, where drone attacks have become the primary source of casualties. By January 2026, Ukraine had recorded 84,000 drone attacks compared with 8,000 missile strikes, while the UAE faced over 300 Iranian drones in a single day. EOS’s high-energy laser systems, capable of engaging 20-30 drones per minute at short range for less than $10 per shot, address these threats with cost-efficient precision.
EOS opened a Singapore manufacturing facility in February 2026, designed to produce up to 20 HELW systems annually. The company’s NIDAR AI system aggregates data from multiple sensors into a single operational picture, enabling engagements in under 10 seconds.
Shares of EOS surged 12.79% to close at $9.70 on Tuesday, near the midpoint of its 52-week range of $4.27 to $12.58.
