Canada’s plan to boost defence spending includes the hope that as much as possible of that spending stays in Canada. That reduces reliance on US defense companies and also nurtures domestic suppliers.
Montreal-based CAE, (TSX, NYSE: CAE) a world leader in flight simulation and pilot training is one company that stands to benefit over time. MDA Space which I wrote about last week is another.
Background: CAE is the world’s largest maker of flight simulators used to train civilian and military pilots. Civil aviation accounts for 60% of its revenue, military is 35%, and healthcare 5%. About 90% of revenues come from outside Canada. Canada’s DND is one of CAE’s largest customers.
Performance: The shares are up 7% year-to-date and 59% in the last 52 weeks based on their recent price of $39.
Recent financials: CAE beat expectations in May when it released its fourth quarter and yearend 2025 results. Quarterly earnings rose 13% to $0.47 per share on revenues of $1.3 billion. On an annual basis, revenue was $4.7 billion with net income of $405 million, 20% higher.
CAE does not break out how much revenue comes from the DND but noted in its year-end report that defense and security revenues for the year were $2 billion, 8% higher than a year earlier.
It offers an array of training, simulation, and operational support services to the Canadian military and NATO. Here are some of the key programs and services.
- Fighter pilot and aircrew training: CAE helps prepare RCAF pilots for the transition to Canada’s next-generation fighter jets. It was chosen as DND’s strategic partner in this area in February 2025. A similar long-term joint venture between CAE and KF Aerospace maintains and upgrade airplanes, trains pilots and provides similar training for naval and coast guard air crew.
- Training NATO pilots: This program provides simulation and in-air instruction for RCAF and NATO pilots at bases in Moose Jaw, Sask. and Cold Lake, Ab. It is operated by CAE and supported by KF Aerospace. The contract, valued at $550 million, was extended through 2027.
- Aircraft fleet support: CAE has long standing contracts to provide systems engineering, logistics, and training support for the CF-18 fighter and Chinook helicopters as well as fixed wing search and rescue aircraft.
CAE turned a corner this year, closing the door on unprofitable fixed price military contracts. Its order books are full and plans to upgrade our military are another positive factor.
Discussion & outlook: CAE’s share performance stems from improving profitability, a strategic leadership change, and rising global demand for pilot training, both civilian and military. The demand should increase in anticipation of defense spending increases by Canada and NATO.
Adam Mayers 
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