Canadian Defence Coverage Update: Thematic Appeal Builds Momentum

Research evidence excerpt

Canadian Defence Coverage Update: Thematic Appeal Builds Momentum

TD Cowen

Global Research June 8, 2026

The Relative Impact of Canadian Opportunities Requires Consideration – Non-

Canadian Defence Revenue Drive Economics

Canada accounted for ~3% of total NATO defence spending in 2025. We

estimate that Canadian companies generate revenue from Canadian defence

and government services that account for low single digit up to 15-20% of

consolidated revenue (exposure to global defence is estimated at 10-44%). While

growth potential from Canada is significant for these companies, it is important

to keep the size of the baseline and significance of Canada as a long-term

customer in perspective when thinking about the underlying economic value

relative to the thematic appeal. We believe we are in a period where the

thematic appeal is more important for determining share prices than the

economic value potential and are approaching our selection of target multiples

accordingly.

Overview of Pathways for Canadian Opportunities – Requires Relationships,

Capabilities and Government Collaboration

Many of the defence equipment expenditure commitments that Canada has

made are to non-Canadian OEMs that have established supply networks that are

already under contract or agreement with the OEMs leaving limited if any

opportunity for new work on Canadian destined equipment. As an example, the

F-35's that Canada is acquiring from Lockheed Martin, and which account for a

significant portion of defence spending growth, are already being produced for

other allies and therefore have an established supply chain. While some

Canadian companies are already embedded in these supply chains (i.e.

Magellan Aerospace on F-35), breaking into these established supply chains