Glossary
Capital expenditure (capex)
Cash a company spends on long-lived assets such as buildings, equipment and software, shown in investing cash flows.
Capital expenditure, or capex, is money a company spends to buy, build or upgrade assets that will be used for more than a year, such as factories, data centers, machinery, vehicles and capitalized software. Rather than hitting the income statement all at once, capex is recorded as an asset and expensed gradually through depreciation. It matters because it is a major use of cash and because it shows how heavily a business must reinvest just to keep running and to grow.
Where to find it and how it is used
Capex appears in the investing section of the cash flow statement, usually labeled "purchases of property and equipment" or similar. Its most important use is in calculating free cash flow:
Maintenance versus growth capex
Analysts try to separate maintenance capex, needed to keep existing assets productive, from growth capex, spent to expand capacity. Companies rarely report the split, so a common rough proxy treats depreciation as approximating maintenance spending. Heavy growth capex depresses free cash flow today in the hope of higher earnings later; whether that pays off depends on the returns the new assets earn.
Watch the trend: capex running far below depreciation for years can mean a company is underinvesting and flattering its cash flow, while a sudden surge, as with recent AI data-center buildouts, raises questions about future returns and depreciation charges.