The Department of National Defence (DND) says in its latest results report that it spent $47.8 billion in the 2025-26 fiscal year, 34 per cent more than the roughly $35.7 billion it first planned.
The 2025-26 Departmental Results Report measures what National Defence and the Canadian Armed Forces (CAF) achieved against its plan. DND says the increase reflects faster investment to re-equip the military and the Canadian Coast Guard’s move into the department in September 2025. The increase meant Canada reached NATO’s benchmark of spending 2 per cent of gross domestic product on defence.
In space, DND awarded its Surveillance of Space 2 contract, began a military satellite partnership with Telesat and MDA Space and opened a race to build a Canadian launch vehicle. Those items are spread across the report’s sections on the Arctic, procurement and innovation.
Satellite communications
Under its Arctic work, DND lists “establishing a strategic partnership with Telesat Corporation and MDA Space” to build up the CAF’s military satellite communications through the Enhanced Satellite Communications Project – Polar (ESCP-P). The contract, though, came after the fiscal year ended March 31. In August, the Defence Investment Agency awarded Telesat an initial $2.3 billion to deliver the project’s first phase, with MDA Space also sharing in the work.
Ground network infrastructure for the Tactical Narrowband SATCOM – Geosynchronous project, which covers the CAF’s narrowband military satellite communications, “was delayed due to resourcing constraints,” the report says. Full operational capability, the point at which the system is fully in service, is now forecast for March 2027.
The Aurora Incremental Modernization Project upgraded the sensors and mission systems of the CP-140 Aurora, the patrol aircraft the CAF uses for surveillance and submarine hunting, to keep the fleet flying until it retires in 2030. The project was cut back in 2024 to a secure data link on 12 aircraft, the supplementary report on major capital projects says. Self-defence systems and “wideband global satellite communications are no longer being delivered,” and two aircraft were not modified. Wideband satellite links carry large amounts of data, such as sensor feeds, from wherever an aircraft is flying. The last upgraded aircraft was delivered in May 2025, and the Auroras are to be replaced by up to 14 new aircraft under the Canadian Multi-Mission Aircraft project.
Watching orbit and the Arctic
DND awarded the Surveillance of Space 2 contract to MDA Space in February 2026. The $32 million deal, placed through the Defence Investment Agency, pays for ground-based telescopes to detect and track objects in Earth orbit.
In its research and development work, DND says prototyping and testing produced “advances across space domain awareness,” one of five areas it lists alongside semi-autonomous systems, cyber resilience, quantum technologies and sensing. Space domain awareness is the ability to know what is in orbit and what it is doing.
For the North American Aerospace Defense Command (NORAD) modernization, DND awarded a $48.4 million contract for an experimental Polar Over-the-Horizon Radar prototype in the Northwest Territories, and agreed with Australia to co-develop Arctic radar technology. DND’s plan for 2026-27 says the polar radar program has since been replaced by NORTHWATCH, which will combine ground and space-based sensors.
The same NORAD section credits the “Gateway to the Stars” challenge with advancing communications by low Earth orbit satellites. It is run by DND’s Innovation for Defence Excellence and Security (IDEaS) program, and Halifax’s Galaxia and Toronto’s Kepler Communications have both won contracts under it.
A Canadian rocket
Launch the North, an IDEaS challenge for “Canada’s sovereign access to space,” supported the space capabilities in the Defence Industrial Strategy launched during the year, the report says. In March, DND picked NordSpace, Canada Rocket Company and Reaction Dynamics for $8.3 million each toward a small rocket that can reach orbit by 2028. Separately, DND signed a 10-year, $200 million lease for a dedicated pad at Maritime Launch Services’ Spaceport Nova Scotia.
New IDEaS challenges opened in the year include one on “exploiting connection of Earth and space systems” to extend communications coverage, and another for tactical-grade clocks “for GPS-denied environments in the North.”
What to expect in the next report
The 2026-27 report will cover the ESCP-P contract. DND’s plan for that year also sets out a $25 million Space Rocketry Challenge and a review meant to turn the Royal Canadian Air Force into an “Air and Space Force.”