Canada’s Defence Spending Boom: 3 Stocks Poised to Win Big

After years of underinvestment, Canada is now taking its defence responsibilities and NATO obligations seriously. The Canadian government has committed to increase its defence spending budget to 5% of gross domestic product (GDP) by 2035.

Recently, it announced that it hit its NATO target of 2% of GDP earlier this year. In the 2026/2027 budget, Canada is projected to spend over $50 billion on defence.

All this to say that Canada is on a defence and infrastructure spending boom. This spending will start to trickle through the economy, and several Canadian stocks could be set to win. Here are three top Canadian defence stocks that are poised to win big in 2026 and the years beyond.

Kraken Robotic: A top defence growth stock

Kraken Robotics (TSXV:PNG) should continue to benefit from a rise in global defence spending. It offers subsea sensors, batteries, and robotic systems. Ocean battlefields are being transformed using drones and remotely operated vehicles. Kraken’s components play perfectly into this trend.

Now, that is clearly reflected in the stock performance. PNG stock is up 1,134% in the past five years! However, the business is really starting to chug. Revenues have grown by a 23% compounded annual growth rate (CAGR) in the past three years. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) have compounded by a 33% annual rate.

This Canadian stock has recently pulled back on news of a major acquisition and equity financing. It is by no means a cheap stock. However, if you want exposure to an exciting, growing defence theme, this is one stock to buy.

Firan Technologies: A top small-cap defence stock

Firan Technologies (TSX:FTG) is a small-cap stock to play growth in defence spending. It has a market cap of $506 million. Like Kraken, it has delivered great returns for shareholders. Its stock is up 779% in the past five years.

Firan supplies essential (but boring) aerospace components like cockpit assemblies/panels, circuit boards, sensors, and antennas. In fact, it supplied switch interface panels on the NASA Artemis spacecraft.

The aerospace supplier has a $60 million backlog that should support mid-teens growth in 2026. With a strong balance sheet, acquisitions could be a booster to that forecast.

MDA: A top space stock

MDA Space (TSX:MDA) is one of the only stocks you will find in Canada with exposure to the space economy. With a market cap of $6 billion, it is a global provider of satellites, space robotics, and geointelligence services.

Space is an increasingly relevant sector of defence. Humans are reliant on satellites for communication, data, and earth tracking. Yet, it could become a battlefield in the future. MDA has the expertise to provide solutions in this area.

MDA has a $4 billion backlog. While it is only projecting 10% revenue growth in 2026, that comes after a year where revenues grew 51%. This stock can be very volatile, so it is best to add it on a pullback.

The Foolish takeaway

Compared to Europe and the U.S., Canadian stocks provide limited exposure to the defence sector. However, the few that do exist could enjoy outsized performance in the years to come. Some other defence stocks to contemplate include Calian Group, Exchange Income Corp., Magellan Aerospace, and CAE.

The post Canada’s Defence Spending Boom: 3 Stocks Poised to Win Big appeared first on The Motley Fool Canada.

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More reading

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Fool contributor Robin Brown has positions in Calian Group, Firan Technology Group, and MDA Space. The Motley Fool has positions in and recommends Firan Technology Group and Kraken Robotics. The Motley Fool recommends Calian Group and MDA Space. The Motley Fool has a disclosure policy.