Can Vection Sustain Growth Amid Defence Sector Competition and Equity Dilution?

Strong Growth in Defence-Focused AI and Spatial Computing

Vection Technologies Ltd (ASX – VR1) has delivered a compelling update showcasing rapid growth and strategic expansion in the burgeoning fields of spatial computing and artificial intelligence. The company reported a 60% increase in revenue for the first half of fiscal 2025, reaching $17.4 million, alongside a positive adjusted EBITDA that improved by 69% compared to the prior corresponding period. This performance underscores Vection’s successful penetration into the defence sector, which is becoming an increasingly significant contributor to its revenue mix amid rising geopolitical tensions and defence spending globally.

Strategic Acquisition and Capital Raise to Fuel Expansion

In a move to strengthen its presence in the Asia-Pacific region, Vection completed the acquisition of DXLabs, an Australian digital transformation company, adding $3.5 million in revenue and $0.8 million in EBIT. This acquisition not only enhances Vection’s delivery capabilities but also expands its enterprise customer base across government, insurance, and logistics sectors, creating cross-selling opportunities with its AI and spatial computing solutions.

Complementing this, Vection announced a $21 million equity raising through a placement priced at $0.06 per share, representing an approximate 12% discount to recent trading prices. The funds are earmarked for accelerating international business development, particularly within defence, retail, and healthcare verticals, as well as debt reduction and working capital. This capital injection provides a solid foundation for Vection to pursue large contracts and convert its substantial $75 million sales pipeline.

Robust Defence Contracts and Market Opportunity

Vection’s proprietary technology platform, IntegratorXR, which integrates spatial computing and AI applications, is gaining traction with leading defence contractors, including NATO and top European Union vendors. The company has secured cumulative contracts worth approximately $40 million over 2.5 years, with potential for an additional $7 million in follow-on orders. These contracts focus on mission-critical ICT infrastructure, AI-powered monitoring, and digital transformation initiatives that enhance real-time, data-driven defence operations.

The defence sector’s addressable market is forecasted to reach around US$1.8 trillion by 2030, driven by increasing defence expenditure targets such as NATO’s proposed 5% GDP allocation. Vection’s growing recurring revenue, now 35% of total revenue and up 209% year-on-year, positions it well to capitalize on this expanding opportunity.

Outlook and Strategic Positioning

Looking ahead, Vection aims for a $70 million revenue target in FY26, supported by a strong pipeline and improved conversion rates. The company’s scalable business model, combined with ongoing R&D enhancements and an expanded sales team, is expected to accelerate international growth, particularly in the US market through partnerships with Dell Technologies and Xerox.

Vection’s leadership team, featuring experienced executives with backgrounds in technology and defence sectors, is steering the company towards becoming a leading integrated software provider in Europe and beyond. With 29 global patents and multiple ISO certifications, Vection’s proprietary IP and agile development approach provide a competitive edge in a rapidly evolving market.