Capital Expenditures (CapEx)

Capital expenditures are the cash a company spends buying or upgrading long-lived assets: factories, stores, servers, drilling rigs. Unlike ordinary expenses, capex does not hit the income statement when the cash goes out — the asset lands on the balance sheet and gets expensed gradually as depreciation over its useful life.

The split that matters is maintenance versus growth. Maintenance capex keeps the current business running (replacing worn trucks); growth capex builds new capacity (a second factory). Companies rarely disclose the split, so analysts approximate maintenance capex with depreciation and treat spending above that as investment in growth.

Capex intensity defines business models. A software firm might spend 3-5% of revenue on capex while a semiconductor fab spends 30-40%, which is why identical EBITDA can produce wildly different free cash flow.