Canada’s defence sector is transforming as rising global security concerns are driving up military spending among NATO (North Atlantic Treaty Organization) allies. The Canadian government is committed to increasing defence expenditures to meet its international obligations. This creates opportunities for domestic contractors positioned to benefit from a multi-year investment cycle.
Unlike their American counterparts, who rely almost exclusively on Pentagon contracts, Canadian defence companies often maintain a more diversified revenue base. They serve both domestic military needs and international markets while supporting allied nations through collaborative programs. This diversification can provide additional stability and growth potential beyond what traditional single-customer defence firms typically enjoy.
The defence industry operates on extended procurement timelines that create predictable revenue streams stretching years into the future. Once a company secures a major contract, it often includes maintenance, upgrades, and support services that generate steady cash flow long after the initial delivery. This visibility makes defence stocks attractive for investors seeking stability in uncertain economic times.
Here are two top defence stocks Canadian investors can buy right now.
Is this TSX stock a good buy?
CAE (TSX:CAE) provides advanced training and simulation solutions across two main segments:
- The Civil Aviation division offers flight simulators, pilot training, and digital solutions for commercial and business aviation.
- The Defence and Security segment delivers simulation and training systems to military forces, government agencies, and defence manufacturers globally.
CAE is entering a new chapter under CEO Matthew Bromberg, who took the helm in mid-August and is now leading a comprehensive transformation plan to unlock shareholder value.
After spending his first 90 days meeting with customers, partners, and employees, Bromberg has confirmed what many already knew. CAE has world-class technology, a leading market share, and strong customer relationships across civil aviation and defence sectors.
Bromberg is implementing sweeping organizational changes designed to simplify the structure and sharpen execution. The company is also eliminating the Chief Operating Officer role to consolidate leadership across both major business segments.
Civil aviation will now operate under a single president combining commercial and business aviation, while defence operations are being streamlined from three separate units into just two.
These changes are the first steps in a broader transformation focused on three priorities: portfolio optimization, capital discipline, and improved operational performance. CAE has invested heavily in growth over the past two decades, building out the world’s largest aviation training network with over 85 locations and 360 full-flight simulators.
Bromberg has already tightened capital approval policies and introduced sharper filters for returns on new investments. The company is conducting a bottom-up review of every business and partnership to ensure management attention is directed where CAE has the greatest competitive advantage.
Analysts tracking the Canadian defence stock forecast adjusted earnings to grow from $1.21 per share in fiscal 2025 to $2.46 per share in fiscal 2030. If CAE stock is priced at 28 times forward earnings, which is in line with the five-year average, it should gain over 80% within the next 40 months.
The bull case for this Canadian defence stock
Valued at a market cap of $970 million, Magellan Aerospace (TSX:MAL) engineers and manufactures aeroengine and aerostructure components for aerospace markets.
In the third quarter of 2025, Magellan reported revenue of $255.66 million, an increase of 14% year over year. During its last earnings call, Magellan explained that manufacturers such as Airbus and Boeing are working through record backlogs approaching 15,000 aircraft.
Airbus is on track to deliver more than 800 aircraft in 2025. Moreover, Boeing is ramping up production under regulatory constraints, with year-to-date deliveries reaching 440 aircraft and analysts projecting a total of 570 for the whole year.
The defence outlook appears strong, with global military spending hitting a record US$2.4 trillion in 2024. Canada has committed over US$9 billion in new defence funding to meet NATO spending targets, recently increased from 2% to 5% of GDP by 2035.
Earlier this year, Prime Minister Mark Carney also signed a partnership with the European Union that could give Canadian defence contractors access to the US$1.25 trillion ReArm Europe Plan.
