From a satellite-maker to a company that helps underwater drones tell the difference between a rock and a naval mine, Canada’s humble military supply sector is lighting up the stock market as investors eye billions in new government spending. A new report by Desjardins notes an “eyewatering increase” in weapons purchases since Prime Minister Mark Carney took office last year.
As tension mounted with the United States, Ottawa in 2025 committed to its biggest military spending hike since the Second World War. Overall, $81.8 billion in new spending over five years was earmarked to strengthen the Canadian Armed Forces.
Carney’s decision to tap former Goldman Sachs banker Doug Guzman to deploy those funds through a new government agency boosted enthusiasm among investors when it was announced last year, waking up a historically sleepy corner of Canada’s stock market. Desjardins deputy chief economist Randall Bartlett says, so far, the deployment of dollars is living up to the hype.
“One of the most surprising contributions to the advance in domestic demand in Q4 2025 was the eyewatering increase in government investment in weapons systems,” he wrote in a research note on Friday.
“In inflation-adjusted terms, Canadian purchases of weapons jumped more than 800 per cent quarter-over-quarter annualized at the end of the year relative to Q3. That follows a more than 1,300 per cent advance [in] the prior quarter.”
According to Statistics Canada figures cited by Desjardins, the federal government’s real spending on weapons systems in 2025 was nearly double its historic peak reached in 2010 during the War in Afghanistan.
“If spending on weapons systems in 2026 looks anything like it did in the second half of 2025, this year could see the largest share of output going to defence in at least the last 65 years,” Bartlett wrote.
Statistics Canada’s definition of military weapons systems is broad. It spans “vehicles and other equipment such as warships, submarines, military aircrafts, tanks, missile carriers and launchers.”
Government accounting spreads these investments over the life of the asset, rather than booking the expense all at once. Single-use items, such as bullets and missiles, as well as structures, such as military bases and airports, are not included.
While ramped-up military spending is creating bullish buzz around some stocks, Desjardins’ Bartlett has some skepticism about the impact on Canada’s economy.
“We believe Statistics Canada may be overestimating the economic impact of the Government of Canada’s expenditure on weapons systems,” he wrote.