Canada is making a concerted effort to grow its defense industrial base and increase exports, moving away from relying primarily on foreign equipment, particularly from the US. This strategy, announced by Prime Minister Mark Carney, aims to direct more procurement toward Canadian companies and increase defense exports by 50%, potentially catalyzing $500 billion in investment over the next decade. This initiative is designed to strengthen Canada's defense capabilities, enhance interoperability with allies, and create economic opportunities for Canadian industries.
Key Canadian companies are expected to play a significant role in this shift. Exchange Income, through its PAL Aerospace business, specializes in surveillance and missionized aircraft, recently securing work with Air Greenland and participating in Canada's Future Aircrew Training program. The company reported a 29% increase in second-quarter earnings per share and raised its 2026 adjusted EBITDA guidance to between $890 million and $920 million. Despite its stock trading at a higher-than-historical valuation of around 24 times forward earnings, its defense and surveillance segments offer a strong growth engine.
CGI is another company well-positioned, as modern defense increasingly incorporates cybersecurity, cloud infrastructure, AI, and secure data management. CGI already supports over 500,000 NATO and national defense personnel with document management systems, command-and-control systems, and AI projects. The company's third-quarter revenue reached $4.2 billion, with adjusted EPS up 9% to $2.29, and it boasts a substantial backlog of $31.8 billion. Its shares trade at approximately 10 times forward earnings, presenting a potentially undemanding valuation for a profitable technology firm embedded within allied government systems.
AirBoss of America's defense business, AirBoss Defense Group (ADG), recently secured a five-year framework contract for its Bandolier energetic system with a NATO partner, including an initial delivery order worth up to $12.5 million. ADG also received orders for AirBoss Molded Gloves (AMG) and Molded AirBoss Lightweight Overboots (MALO) totaling up to $4.4 million from various NATO partners. These contracts underscore the increasing demand for ADG's survivability solutions within evolving battlefield requirements. Furthermore, Canada is moving forward with the potential acquisition of six Saab GlobalEye airborne early warning and control aircraft, valued at over $5 billion CAN ($3.6 billion US), with the aim of having at least one-third of future GlobalEye orders built in Canada, creating jobs and fostering domestic expertise.
