For years, the Canadian defence industry was a quiet corner of the stock market. But with global geopolitical tensions escalating and Ottawa under mounting pressure to meet NATO’s defence spending threshold, Canada’s Department of National Defence is ramping up capital allocations. Huge multi-year commitments to Arctic sovereignty, maritime security, and NORAD modernization are opening up a generational growth runway for well-positioned Canadian defence stocks.
However, defence stock investors face a fresh challenge in 2026: trade wars.
With rising trade protectionism and shifting political dynamics across the border, Canadian defence companies heavily dependent on exporting finished goods into U.S. prime contractor supply chains could face margin compression or trade headwinds.
The most promising investment returns for long-term investors could lie in Canadian defence stocks that combine strong exposure to expanding global defence budgets with direct trade insulation – whether through locked-in Canadian government contracts, direct European NATO exposure, or smart “in-country” U.S. manufacturing footprints.
Here are three top Canadian defence stocks that fit this stock selection criteria today.
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Buy the dip on Kraken Robotics stock
Canadian investors looking for hyper-growth in high-tech defence, subsea domain awareness is one of the most critical frontiers – and Kraken Robotics (TSXV: PNG) is a global market leader with a growing addressable market.
Kraken specializes in synthetic aperture sonar (SAS), subsea robotics, and acoustic batteries used for mine countermeasures, anti-submarine warfare, and critical seabed infrastructure protection. As underwater pipelines, cables, and maritime borders face increased security threats, navies worldwide are scrambling to upgrade their subsea surveillance capabilities.
Why should you buy Kraken Robotics stock now? Kraken stock gives Canadian investors pure-play exposure to subsea NATO modernization without high reliance on cross-border U.S. trade channels. The defence stock’s revenue base is well-diversified outside the U.S. Revenue from across North America comprised 35.8% of total sales during the first half of 2026.
Kraken Robotics’s recently closed acquisition of the Covelya Group may add growth momentum. Sales may double over the next 12 months, and the business may break into sustainable profitability and grow operating cash flow in 2027.
Following a drop during the dilutive acquisition of Covelya, Kraken Robotics stock trades at a forward P/E of 31. A forward price-earnings-to-growth (PEG) ratio of 0.4 implies the Canadian defence stock could be underpriced given its earnings growth potential.
MDA Space
Canadian sovereign defence treats space as a national security frontier today. MDA Space (TSX: MDA) is Canada’s premier space technology contractor behind the RADARSAT Constellation Mission, which provides 24/7 surveillance of Canada’s vast Arctic landmass, maritime approaches, and northern borders. The space exploration and defence stock remains a critical contractor as Canada prioritizes Arctic sovereignty and NORAD modernization in 2026.
Why buy MDA stock right now? MDA Space offers investors revenue and earnings stability through sovereign government backlogs, and tight commercial orders, making it a low-risk, anchor holding for a Canadian defence stock portfolio.
Revenue increased by 34% year-over-year during the second quarter. Looking forward, annual sales may surge by 50% over the next year, while earnings may rebound strongly to exceed a recent three-year growth rate above 22.5%.
Meanwhile, a forward P/E of 21 and a PEG ratio of 0.8 appear to imply MDA stock could be undervalued given its earning potential as its order backlog gains growth momentum in 2026.
MDA Space stock generated 67.8% of its revenue from Canada and 26.3% of sales were from U.S. customers during the first half of 2026. European revenue is growing.
Firan Technology Group
Canadian investors seeking a strong compounder with a shrewd hedge against U.S. trade barriers should find Firan Technology Group (TSX: FTG) a hidden gem in the Canadian aerospace and defence sector.
FTG manufactures high-reliability printed circuit boards (PCBs), illuminated cockpit panels, and electronic assemblies for military aircraft, helicopters, and defence platforms globally.
What makes FTG uniquely positioned in a protectionist trade environment is its manufacturing strategy. Rather than shipping everything across the border, FTG operates specialized manufacturing plants in the United States and in Canada. This allows FTG to fulfill U.S. defence contracts “In-America for America” and bypass cross-border tariffs, while using its Canadian operations to serve domestic and international defence programs.
Most noteworthy, FTG stock employs an accretive acquisitions-led growth strategy. It has a stellar track record of acquiring smaller aerospace electronics manufacturers at attractive valuations and integrating them to boost its earnings per share, while maintaining a strong balance sheet.
Up 73% year-to-date, FTG stock could be a profitable momentum trade at a forward P/E of 22.
