Canada’s defence buildout could become much more than a very expensive shopping trip.
At the Canada Investment Summit, executives repeatedly described an opportunity to turn rising military spending into something Canada can actually sell.
Ottawa’s Defence Industrial Strategy aims to direct more procurement toward Canadian companies, build domestic production, and ultimately increase Canadian defence exports by 50%. Prime Minister Mark Carney told summit investors the broader strategy could catalyse roughly $500 billion of investment over the next decade.
For investors, that opens the door well beyond the aircraft manufacturers everyone already knows.
Source: Getty Images
EIF
Exchange Income (TSX: EIF) is one of my favourite less-obvious choices. Its PAL Aerospace business designs and modifies aircraft for intelligence, surveillance, and reconnaissance missions. PAL Aerospace recently won work modifying aircraft for Air Greenland’s surveillance operations. It is also participating in Canada’s Future Aircrew Training program, including support for the Royal Canadian Air Force’s CT-142Q aircraft.
The broader company is performing well too. Second-quarter earnings per share (EPS) increased 29%, prompting Exchange Income to raise its 2026 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance to between $890 million and $920 million.
The company also increased its monthly dividend to $0.24 per share. At around $118, EIF trades near 24 times forward earnings. That’s richer than its historical valuation, making price my biggest concern. Still, defence and surveillance provide another growth engine inside an already diversified aviation business.
CGI
The second stock is CGI (TSX: GIB.A). Modern defence isn’t just submarines and fighter jets. It’s cybersecurity, cloud infrastructure, artificial intelligence, electronic warfare, and enormous quantities of secure data. CGI already works across all of them.
More than 500,000 NATO and national defence personnel use its document-management systems. CGI also supports command-and-control systems, electronic warfare, secure communications, and AI projects for NATO organizations.
It recently signed a contract with the NATO Communications and Information Agency for secure mobile communications. That makes CGI particularly interesting as allies spend more on digital defence without necessarily ordering another piece of giant hardware.
Third-quarter revenue reached $4.2 billion, while adjusted EPS increased 9% to $2.29. Backlog sits at an enormous $31.8 billion. Yet shares recently traded around $97, or only about 10 times forward earnings. Growth has been modest, and not all CGI revenue comes from defence. Still, that’s a pretty undemanding valuation for a profitable technology company already embedded inside allied government systems.
CLS
Then there’s Celestica (TSX: CLS). The Toronto-based company manufactures mission-critical electronics used across defence aircraft, ships, land systems, drones, and space equipment. Its products include secure communications, avionics, guidance electronics, radar-related systems, and other components that disappear inside the flashy equipment governments actually announce.
That’s appealing because defence manufacturers need to increase production before they can fill growing order books. Celestica’s total second-quarter revenue surged 62% to US$4.7 billion, while adjusted EPS reached US$2.54. Most of that explosive growth currently comes from AI and data-centre infrastructure rather than defence. That’s also the risk in using CLS as a defence play.
Yet management says aerospace and defence have a strong long-term demand outlook, supported by new programs. Around $465, Celestica trades near 22 times forward earnings after an extraordinary run. It’s the most expensive-looking share price of these three, but also the company sitting between two enormous spending cycles: AI infrastructure and defence electronics.
Bottom line
Canada doesn’t simply want to spend more on defence. It wants Canadian companies selling more of it abroad. Exchange Income supplies surveillance aircraft expertise. CGI supplies digital defence. Celestica supplies the electronics. That’s a much wider investment opportunity than another fighter-jet order.
