Definition
Capital Expenditures – Spending on long-lived assets such as servers, chips, data centers and property. It is capitalized on the balance sheet and expensed gradually through depreciation, so a heavy spending year hits cash flow immediately but the income statement only over the assets' useful lives. In AI cloud businesses capex is front-loaded ahead of the revenue it is meant to support, which is why free cash flow» can be deeply negative while revenue grows quickly; the useful questions are how long the spending takes to pay back and whether the assets' stated useful lives are realistic. Found In: Cash Flow Statement (purchase of property and equipment), and management commentary