2 ASX Defence Penny Stocks to Watch in a Volatile World

In today’s increasingly uncertain world, defence spending is on the rise. Nations across the globe are investing heavily in advanced military technologies, drone defence, and aerospace innovation to strengthen security and maintain geopolitical stability. For investors, this trend presents an opportunity — and it’s not limited to large-cap defence contractors.

Within the ASX small-cap and penny stock universe, two emerging players — Titomic Limited (ASX: TTT) and HighCom Limited (ASX: HCL) — are quietly carving out their niches in the global defence landscape. Both companies are technology-driven, globally expanding, and poised to benefit from growing defence budgets worldwide.

Let’s explore why these two ASX defence penny stocks could become dark horses in 2025 and beyond.

Titomic Limited (ASX: TTT): Redefining Defence Manufacturing

Titomic Limited is not your typical manufacturing company. It’s a global pioneer in advanced additive manufacturing, specializing in a breakthrough technology called Titomic Kinetic Fusion (TKF). This process allows the creation of larger, stronger, and lighter metal parts without traditional welding or casting — an innovation that’s revolutionizing aerospace, defence, and industrial production.

Strong Growth and Global Expansion

FY2025 was a landmark year for Titomic. The company reported a 37% jump in revenue to $8.1 million, up from $5.9 million the year before. This impressive growth came alongside a successful $80 million capital raise, aimed at fueling its international expansion.

One of the most significant milestones for Titomic in 2025 was the establishment of its new global headquarters and manufacturing facility in Huntsville, Alabama — a 59,000-square-foot facility located at the heart of the U.S. aerospace and defence ecosystem. This region is home to defence giants like Northrop Grumman, Boeing, and Lockheed Martin, positioning Titomic strategically close to potential clients and partners.

With this expansion, Titomic has positioned itself as a key enabler of advanced manufacturing for high-performance parts used in fighter jets, naval systems, and unmanned aerial vehicles (UAVs).

Defence Sector Opportunities

The defence industry’s growing demand for lightweight, high-strength components aligns perfectly with Titomic’s technology. Its TKF system can produce complex parts quickly and efficiently — ideal for rapid defence production cycles.

The company’s recent inclusion in the CRP DefenseTech Accelerator program further validates its capabilities. This partnership opens doors to collaboration with leading defence contractors, accelerating Titomic’s entry into mainstream defence supply chains.

Looking ahead, Titomic is targeting an ambitious revenue goal of US$750 million by 2030, fueled by strong demand across defence, aerospace, and maintenance, repair, and overhaul (MRO) markets worldwide.

With strategic contracts, global partnerships, and a proprietary technology that’s hard to replicate, Titomic is positioning itself as a next-generation manufacturer for global defence needs.

HighCom Limited (ASX: HCL): Building Smart Defence Solutions

While Titomic focuses on advanced manufacturing, HighCom Limited is tackling defence from a different angle — by creating cutting-edge protection and surveillance systems. The company designs and manufactures a range of defence and aerospace products, specializing in electronic warfare systems, missile warning technology, and counter-drone (C-UAS) systems.

Steady Financial Performance and Growth Momentum

For the fiscal year ending June 2025, HighCom reported revenue of $48.1 million, reflecting steady growth despite competitive pressures. A major highlight was securing a $2.6 million contract for Counter Small Uncrewed Aerial Systems (C-sUAS) — an area of rising global demand as drones become a growing security threat.

HighCom also recommissioned its XTclave system in Ohio, effectively doubling its production capacity to meet U.S. defence orders. This advanced system enables the manufacturing of lightweight, high-strength composite materials, widely used in ballistic armour and protective gear.

Beyond manufacturing, the company has been investing in its U.S. operations, hiring skilled personnel and upgrading facilities to support higher output and faster contract fulfillment.

Strategic Outlook and Market Relevance

HighCom’s focus on counter-drone and electronic warfare systems places it right in the middle of one of the fastest-growing defence segments. Governments and military agencies are rapidly increasing spending on anti-drone technologies to counter surveillance and attack drones, creating a massive addressable market.

Additionally, the company’s strategic diversification into integrated systems — combining hardware, software, and communications — enhances its long-term competitiveness. Analysts expect EBITDA margins to turn positive in the near term as production scales up and contracts become more profitable.

With its U.S. footprint expanding and global defence spending on the rise, HighCom’s growth story is gaining real momentum.

Why These Stocks Matter Now

The world’s geopolitical climate has become increasingly unpredictable. Conflicts in Eastern Europe, rising tensions in the Indo-Pacific, and greater emphasis on domestic defence capabilities have all contributed to record-high global defence budgets.

For small-cap investors, companies like Titomic and HighCom offer a chance to participate in this powerful global trend — without paying large-cap valuations.

Here’s why these stocks stand out in 2025:

1. Innovation leadership: Titomic’s cold spray additive manufacturing and HighCom’s electronic warfare technologies are at the cutting edge of modern defence systems.
2. Strategic U.S. expansion: Both companies have established major operations in the U.S., the world’s largest defence market.
3. Rising order books: Recent contract wins and government partnerships support stronger revenue visibility.
4. Sector tailwinds: Global defence spending topped US$2.2 trillion in 2024, and continues to rise.
5. Attractive valuations: As penny stocks, they offer high growth potential from a low base — though with higher volatility.

Small Players, Big Potential

In a world where global tensions show no signs of easing, defence stocks have emerged as a strategic play for investors seeking growth, resilience, and innovation. While large companies like Lockheed Martin or BAE Systems dominate global headlines, the next wave of growth could come from smaller innovators — and that’s where Titomic (TTT) and HighCom (HCL) come in.

Both companies are leveraging technology, expanding globally, and aligning their offerings with the priorities of modern defence programs. Their progress in additive manufacturing, counter-drone systems, and aerospace innovation gives them an edge in sectors poised for exponential growth.

Of course, as penny stocks, they come with higher risk — but also outsized reward potential for those willing to hold through volatility.

For investors looking to capture exposure to Australia’s growing defence innovation ecosystem, Titomic and HighCom are two ASX penny stocks worth watching closely as the world navigates a more complex and security-conscious future.

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