Investment Note
Canada's Next Defence Champions?
Why Kraken Robotics and Volatus Aerospace May Be Entering a Multi-Year Growth Cycle
August 2026
For most of the past two decades, Canada's defence technology sector has received relatively little investor attention. That landscape is changing rapidly.
The geopolitical environment has shifted dramatically. NATO members are increasing defence expenditures, Europe is rebuilding military capability, Arctic security has become a national priority, and autonomous systems have moved from experimental technologies to essential military assets.
Within this changing landscape, two Canadian companies have emerged as potential long-term winners:
- Kraken Robotics (TSX-V: PNG)
- Volatus Aerospace (TSX: FLT)
At Retire Fund, we increased our positions in both companies during June because we believe they are well positioned to become strategic suppliers within their respective markets.
A Structural Shift in Defence Spending
Unlike previous defence spending cycles, today's procurement environment is expected to extend over many years rather than a single budget cycle.
Canada has committed to significantly increasing defence spending while NATO allies continue investing in:
- autonomous underwater systems
- military drones
- AI-enabled surveillance
- border security
- Arctic sovereignty
- naval modernization
- protection of critical subsea infrastructure
This is creating sustained demand for specialized technologies rather than traditional weapons systems alone.
Kraken Robotics
Becoming a Strategic Maritime Technology Company
Kraken Robotics has quietly evolved from a small Canadian technology developer into one of the world's leading suppliers of advanced subsea sensing and autonomous maritime systems.
Its technology portfolio now includes:
- Synthetic Aperture Sonar (SAS)
- SeaPower subsea batteries
- autonomous launch and recovery systems
- underwater navigation systems
- subsea positioning technologies
- advanced seabed imaging
- offshore inspection services
These technologies support:
- mine countermeasure operations
- submarine detection
- underwater surveillance
- cable and pipeline inspection
- offshore energy infrastructure
- autonomous underwater vehicles
Unlike many defence technology companies that remain in the development phase, Kraken is already delivering products to military and commercial customers around the world.
Recent milestones reinforce this transition:
- approximately $327 million in combined 2026 product orders following the acquisition of Covelya Group;
- continued demand for SeaPower batteries, synthetic aperture sonar, and navigation systems;
- strategic acquisitions expanding its capabilities and international footprint.
Rather than simply selling equipment, Kraken is increasingly becoming part of the long-term modernization programs of allied navies.
That distinction matters.
Recurring participation in fleet modernization programs typically leads to longer customer relationships, greater revenue visibility, and higher valuation multiples.
Volatus Aerospace
Building Canada's Drone Infrastructure
While Kraken dominates beneath the ocean's surface, Volatus Aerospace is positioning itself above it.
The company has assembled one of Canada's broadest autonomous aviation platforms.
Its capabilities include:
- military drone operations
- AI-enabled autonomous flight
- surveillance
- infrastructure inspection
- emergency response
- logistics
- pilot training
- aerial intelligence
- beyond-visual-line-of-sight operations
Recent developments demonstrate its strategic direction:
- introduction of a Canadian sovereign AI flight controller and autonomy stack;
- advancement to the next phase of the U.S. Drone Dominance Program;
- partnership to advance sovereign Canada–Ukraine defence technologies;
- completion of a $34.5 million bought-deal financing to support growth.
As governments increasingly emphasize sovereign drone capability, domestic manufacturers and operators may become increasingly valuable strategic assets.
Why Partnerships Matter
One of the more encouraging developments for both companies has been growing interest from larger organizations seeking partnerships rather than direct competition.
Large defence contractors typically partner when:
- technology is differentiated
- intellectual property is difficult to replicate
- development timelines would be lengthy
- customers already trust the products
- acquisition or partnership is faster than building internally
While every partnership differs in commercial significance, sustained interest from larger industry participants can be an indicator that these companies possess capabilities that are strategically valuable.
Potential Impact of Major Defence Contracts
The market often reacts to defence contracts based not only on their immediate revenue contribution but also on what they imply about future opportunities.
A significant contract from:
- the Canadian Armed Forces,
- the U.S. Department of Defense,
- the Royal Navy,
- Australia,
- Germany, or
- other NATO partners
could serve as validation that these companies have become trusted suppliers for long-term procurement programs.
For Kraken Robotics, such awards could reinforce its position as a core supplier of underwater autonomous technologies.
For Volatus Aerospace, they could validate its emerging role in military drone operations and autonomous aviation.
Historically, defence technology companies that transition from isolated contracts to repeat procurement programs often experience valuation expansion as investors begin pricing in future contract opportunities rather than individual awards alone.
Long-Term Market Opportunities
Kraken Robotics
The addressable market includes:
- naval modernization
- autonomous underwater vehicles
- subsea intelligence
- offshore energy
- undersea communications protection
- mine countermeasures
- Arctic surveillance
These markets are expected to remain priorities for Western governments throughout the coming decade.
Volatus Aerospace
The drone market continues expanding across:
- defence
- border security
- infrastructure inspection
- emergency services
- energy
- transportation
- industrial automation
Increasing adoption of AI-enabled autonomous flight systems should further expand commercial opportunities beyond military applications.
Investment Risks
Both companies remain growth businesses.
Investors should recognize several risks:
- execution risk
- contract timing
- government procurement delays
- capital requirements
- customer concentration
- competitive technologies
- valuation volatility
Small-cap defence companies can experience significant share-price swings following both positive and negative news.
Position sizing should reflect that reality.
Investment Outlook
While Kraken Robotics and Volatus Aerospace operate in different markets, they share several characteristics:
- proprietary technologies
- exposure to long-term defence spending
- expanding international customer bases
- growing strategic importance
- increasing visibility among larger defence contractors
Kraken Robotics appears to be the more mature investment today, supported by proven products, expanding order flow, and growing participation in naval modernization programs.
Volatus Aerospace offers higher execution risk but potentially greater upside if military drone adoption continues accelerating and the company converts its technology platform into recurring defence contracts.
As Canada, the United States, and NATO allies continue investing in autonomous defence capabilities, both companies appear well positioned to benefit from one of the most significant defence modernization cycles in decades.
For long-term investors, these businesses represent more than speculative technology companies. They may be evolving into strategic Canadian defence champions with the potential to participate in a multi-decade global expansion of autonomous maritime and aerial systems.
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