These 2 ASX Stocks May Benefit from Global Geopolitical Trends

Global politics is no longer just about diplomacy and treaties—it’s shaping markets, industries, and investment opportunities. As geopolitical tensions rise, defence spending is surging across the Indo-Pacific, Europe, and the Middle East. Countries are racing to secure supply chains, modernize fleets, and protect critical infrastructure from emerging threats such as low-cost drones.

For investors on the ASX, two names stand out as direct beneficiaries of these shifts: Austal Limited (ASX: ASB) and DroneShield Limited (ASX: DRO). One is a naval shipbuilder with a multi-decade pipeline, the other a counter-drone technology leader riding explosive demand. Together, they capture both the long-cycle and fast-cycle sides of defence spending.

Austal: Australia’s Strategic Shipbuilder

Austal isn’t new to defence, but FY2025 marked a real turning point. The company, best known for designing and building naval ships, now holds a position at the heart of Australia’s sovereign shipbuilding ambitions.

• FY2025 performance: Revenue jumped 24% YoY to $1,823.3 million, while net profit after tax surged 503% YoY to $89.7 million. That’s not just growth—it’s a reset in profitability.
• Balance sheet strength: Austal ended FY2025 with $583.9 million in cash reserves . Operating cash flow also turned positive at $406.3 million, giving the company ample room to expand capacity.
• Order book visibility: At 30 June 2025, Austal’s order book stood at a near-record $13.1 billion, with another $420 million in options exercised post-year-end. This includes 49 vessels under construction or scheduled and 73 vessels under sustainment worldwide.

The real game-changer, though, is Austal’s Strategic Shipbuilding Agreement (SSA) with the Australian Commonwealth. Signed in FY2025, the deal designates Austal as the Strategic Shipbuilder for Tier-2 surface combatants in Western Australia. This 15-year framework ensures continuous naval shipbuilding in the region, locking Austal into future programs like the LAND8710 landing craft (LC-Medium and LC-Heavy).

Why geopolitics helps Austal:
With the Indo-Pacific becoming the world’s most contested maritime zone, demand for naval vessels is accelerating. Australia, alongside allies such as the US and Japan, is investing heavily in maritime defence to secure sea lanes and deter regional tensions. Austal’s role as a sovereign supplier ensures a steady stream of work, while its US operations give it exposure to allied fleet recapitalisation. The combination creates multi-year earnings visibility rarely seen outside infrastructure.

DroneShield: Riding the Counter-Drone Wave

If Austal is about building fleets, DroneShield is about protecting them. The Sydney-based company specializes in counter-drone and electronic warfare systems—a market that has exploded as drones become the weapon of choice in modern conflicts.

1. Revenue momentum: In the first half of FY2025, DroneShield reported $72.32 million in revenue, up 210% year-on-year. Even more striking, the company has already locked in more revenue for FY2025 than it generated across the entire FY2024.
2. Geographic diversification: Sales are now more evenly spread, with the Asia-Pacific contributing 27%, Europe 16%, and the US 20%.
3. Product mix shift: Fixed-site solutions (think base and critical infrastructure defence) rose to 60% of sales, up from just 19% in FY2024. This points to long-term, higher-value contracts rather than one-off mobile deployments.
4. Contract wins: FY2025 has already included large deals, such as European defence orders worth $40–61 million and a $32.2 million Asia-Pacific military contract. These wins highlight both urgency and trust from major buyers.

Why geopolitics helps DroneShield:
From Ukraine to the Middle East, drones are rewriting the rules of combat. Cheap to produce but capable of serious damage, they’re forcing militaries worldwide to accelerate counter-drone procurement. DroneShield, with its proven systems and software-based revenue streams (such as subscriptions and warranties), is well placed to benefit. Unlike traditional defence projects that take years to materialize, counter-drone demand is immediate, recurring, and global.

Why These Two Stocks Work Well Together

For investors considering exposure to defence, Austal and DroneShield offer complementary strengths:

1. Exposure mix: Austal delivers long-cycle cash flows through shipbuilding and sustainment programs. DroneShield offers short-cycle, high-growth opportunities tied directly to current threat environments.
2. Funding strength: Austal’s net-cash balance and sovereign agreement give it room to expand capacity without stretching finances. DroneShield’s growing cash position supports R&D and inventory build without the need for constant capital raises.
3. Strategic positioning: Austal anchors Australia’s maritime capacity, while DroneShield tackles one of the most urgent new threats in modern warfare. Together, they cover both legacy and emerging defence needs.

Risks to Keep in Mind

Like all defence stocks, these names come with execution and geopolitical risks:

Austal: Program execution remains critical as order volumes ramp up. Investors should also watch the pace of capital deployment versus potential shareholder returns, especially given the company withheld an FY2025 dividend to prioritize expansion.

DroneShield: Rapid growth creates working capital pressure, and timing of deliveries can swing results. Competition from larger defence primes is also a factor, while valuations can be sensitive to news flow on conflicts or contract wins.

The Bottom Line

Global geopolitics is no longer background noise—it’s a central driver of defence spending and industrial strategy. Austal and DroneShield stand out on the ASX as companies already benefiting from these shifts, not just waiting for them.

Austal now has a decade-plus pipeline secured through its Strategic Shipbuilding Agreement, near-record order book, and strong cash position.

DroneShield is riding an unprecedented wave of counter-drone demand, with contracts across Europe, Asia-Pacific, and the US, and triple-digit growth to show for it.

For ASX investors seeking to position themselves in line with rising defence priorities, this duo offers a blend of stability and growth. One builds the fleets; the other protects them. And both are on the right side of today’s geopolitical realities.

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