04/28/2026
CAPEX - DEFINITION & MEANING
Clients who watch the business and stock market news channels on TV often hear the word CAPEX in reference to major companies such as Microsoft, Google, Meta, Amazon etc. Some have asked me what CAPEX means, so BELOW I have posted its definition and meaning purely for educational purposes. CAPEX is short for CAPITAL EXPENDITURE.
CAPITAL EXPENDITURE (CAPEX) is money a business spends to acquire or upgrade assets it owns such as land, equipment, or a building. The current ARTIFICIAL INTELLIGENCE (AI) boom has many major companies - leaders in their fields, such as the before mentioned ones, allocating more money to CAPEX than they ever have in the past in order to continue being leaders in their field of business in the future, hence they have a ..... HIGH CAPEX.
CAPITAL EXPENDITURES (CAPEX) are made on assets that you expect to be of long term benefit to your business. A computer is a great example, if you plan to use it in your business and not sell it within a year.
You record Capital Expenditures on your balance sheet under assets rather than your income statement. It’s often recorded as property, plant and equipment (PP&E). As Capital Expenditures are used, they are depreciated on the books for tax purposes. CAPITAL EXPENDITURE is the opposite of OPERATING EXPENDITURE (OPEX).
CAPEX VS. OPEX - what's the difference?
The primary difference between CAPEX and OPEX is how and how long you'll use the asset your business purchased. CAPEX items are assets you'll use to make money over a long period of time. OPEX are what you spend day-to-day to run your business. Operating expenditures include payroll, utilities, insurance, marketing, advertising, and materials and supplies you use up in your production or operating process.
Examples of CAPEX are:
Property, including your land and buildings
Fit-outs of buildings, such as furniture and infrastructure
Equipment, vehicles, and work tools, like computers
Research and development (R&D) expenses
Intellectual property, such as patents and copyrights
Buying an existing business new to you.
Maintenance CAPEX VS growth CAPEX
CAPEX is made up of two types:
1. Maintenance CAPEX
2. Growth CAPEX
MAINTENANCE CAPEX is what you spend to replace EXISTING assets in order to keep operating and maintaining your current level of revenue and profitability. Replacing an old warehouse forklift is an example. Maintenance CAPEX is a NECESSARY expense if you want to continue to maintain profitability in your business.
GROWTH CAPEX is money you spend to grow your business, revenue and profitability. For example, GROWTH CAPEX adds assets that increase productivity, capacity, or expand your business into new markets. Buying three new forklifts for your new larger warehouse is an example. GROWTH CAPEX is a DISCRETIONARY expense for expansion of your business.
