Fears that artificial intelligence will eat into corporate profits have hit another corner of the Toronto Stock Exchange, with shares of Canada’s leading engineering companies sinking despite solid financial results.
Over the last two weeks, Montreal-based WSP Global Inc. WSP-T and Edmonton-based Stantec Inc. STN-T both reported organic revenue growth of 3 per cent to 5 per cent, meaning their existing businesses are expanding without the help of new acquisitions, yet investors continue to sell their shares over concerns that AI will eventually make a good chunk of their work evaporate.
The fear is that AI will be able to cheaply, and easily, perform tasks that consultants currently charge hefty fees for. That fear started spreading about six months ago. Since then, Stantec’s shares are down 23.7 per cent, while WSP’s are down 23.1 per cent. Over the same period, the S&P/TSX Composite Index is up 12.5 per cent.
It isn’t a Canada-only problem. In the U.S., rival engineering and infrastructure consulting firms such as Jacobs Solutions Inc. J-N, Aecom ACM-N and Tetra Tech Inc. TTEK-Q have all suffered, and the sell-off became pronounced in May. The question now is whether anything can turn the tide, because the engineering industry is mimicking the software sector, where companies such as Constellation Software Inc. have lost half their value over the past year. No matter what their executives say, these companies can’t seem to win back investors.
For Canada’s engineering firms, the negativity is jarring. They were TSX stars for multiple years, and their market values exploded as they expanded around the world by continually scooping up rival firms. In late 2025, for instance, WSP paid US$3.3-billion in cash to buy U.S. power and energy service consultancy TRC Companies.
Ian Gillies, an analyst at Stifel who covers engineering firms, recently met with a number of institutional investors to discuss companies such as Stantec, WSP and Montreal-based AtkinsRéalis Group Inc. ATRL-T, and he came away thinking it is going to be a long slog for them from here.
“We have spent the last few weeks conducting analyst marketing,” he wrote in a note to clients. “And it is very clear that the pedestal that these stocks were on over the previous five years is no longer in place and that there is an uphill battle ahead to regain premium valuation multiples.”
What makes the reversal even more strange is that construction companies are now some of the leading stocks to own in the sector. Both Aecon Group Inc. ARE-T and Bird Construction Inc. BDT-T have watched their share prices more than double over the last year.
Until recently, construction firms struggled to win over investors because of their histories of cost overruns and delays on project completions.
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The reversal can also be frustrating for engineering firms because they have strong tailwinds. “We believe the demand outlook for the engineering and construction space continues to be favorable, underpinned by large-scale infrastructure investments across major global markets (i.e., Canada, U.S., U.K., Australia), growing AI/data center and power-related activity, and selective M&A,” analysts at RBC Dominion Securities wrote in a recent note to clients.
But when investor sentiment turns, Mr. Gillies at Stifel wrote recently, it is a hard thing to win back. He used to cover Canadian pipeline companies such as Enbridge and TC Energy in 2018 and 2019 when oil prices plummeted, and back then, there was a belief that Canadian oil production would never grow again.
“This was proven incorrect, but it took five-years for the stocks to re-rate” he wrote.
Rather than simply wait it out, Stantec’s management appears to be making a pivot. On a quarterly conference call last week, chief financial officer Vito Culmone said the company is likely to redeploy funds it would normally use for acquisitions toward share buybacks. “I think, frankly, at these valuations levels, it’s becoming increasingly hard to ignore not getting into the market and buying back stock,” he said.
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WSP chief executive Alexandre L’Heureux, however, continued to make the case that investor fears about AI are overblown.
“Actually, I don’t see our revenue stream shrinking,” he said on a quarterly call in early May. “To the contrary, I see us being in a position to offer better quality assets to the world and the local communities where we live... I don’t see this being a disruptor in the sense that this will reduce hours or reduce the work that we need to do.”
He also stressed that there is a major infrastructure deficit globally, which will continually to make work for these firms. He said there is a shortage of engineers available for this boom.
“We all know that over the next 10 years, not just in the engineering industry, but in all industries, we’ll have many baby boomers retiring.” He estimates WSP’s revenue will grow 4 per cent to 7 per cent organically this year, while the pool of engineers in the world is only growing by one per cent.
“We are capacity constrained,” he said. “What if AI would be a great tool for us to increase our capacity and be in a position to produce more?”