Financial Statement Basics

CapEx (capital spending)

Capital Expenditure

At a glance

Money spent on long-lived facilities such as plants, machinery, and buildings — spending invested for the future.

CapEx = cash spent to acquire tangible assets (plants, equipment, etc.)

Large CapEx can be seen as a period of aggressive investment to grow the business, while small CapEx suggests a focus on maintaining existing facilities.

In plain terms

Just like the money a café spends on a new coffee machine or on expanding its store, CapEx (capital spending) is the money a company spends on facilities it will use for years — plants, machinery, buildings, servers, and the like.

Rather than a cost that is used up and gone within the year, it is closer to an "investment for the future" that will generate revenue over the next several years.

What it tells you

It shows how much money a company spends on future growth or on expanding production capacity.

CapEx is the item subtracted from the cash the main business earns when calculating free cash flow (FCF), so why FCF sits at its level only becomes clear when you place CapEx alongside it (operating cash flow − CapEx = FCF).

Formula

CapEx = cash spent to acquire tangible assets (plants, equipment, etc.)
(an investing-activities item on the cash flow statement)

What high or low means

Large CapEx can be seen as a period of aggressive investment to grow the business, while small CapEx suggests a focus on maintaining existing facilities.

The scale differs greatly by industry (semiconductors, telecom and airlines are enormous, while software is small). So the sizes cannot be compared across different industries.

Caution

Large CapEx is not a bad thing in itself. It can be a seed for future revenue. That said, in years with large CapEx, free cash flow (FCF) for the moment decreases.

Money spent to "maintain" facilities and money spent to "grow" them are different in nature. Even with the same large CapEx, spending for growth and replacing aging equipment mean different things.

Metrics to read alongside

FCF (Free Cash Flow)

Subtracting CapEx from the cash the main business earns (operating cash flow) gives free cash flow (FCF). The larger CapEx is, the smaller FCF becomes, so looking at both together helps you understand why FCF is at that level.

Operating Cash Flow (OCF)

Since CapEx (cash spent on facilities) is subtracted from operating cash flow (cash earned), looking at them together shows how much of the cash a company earns goes into investment.

Guides that cover this term

How to read the three financial statements

A US company’s financial statements come in three parts, and the three are linked. Where to find them in SEC filings, what order to read each one in, and where they commonly trip people up.

See it in real stocks

Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.

C Citigroup Inc.QSR CMCSA Comcast Corporation SWX GWW W.W. Grainger, Inc.NEE NextEra Energy, Inc.Search stocks →

Exactly how Stocklore computes this metric (formula, thresholds, SEC source) is on the methodology page.

This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.