What is capex (capital expenditures)? Definition, examples and why AI is driving it higher in 2026

Capex – short for capital expenditures – is money a company spends to buy, build or upgrade physical assets it expects to use for the long-term economic benefit of the company. These include buildings, machinery, vehicles, computer equipment and – increasingly – the data centers and chips powering artificial intelligence (AI). It's different from the everyday costs of running a business, and that distinction can offer insight into how a company is allocating capital. Capex is one of the more closely watched figures in corporate earnings in 2026, largely because of how much money tech companies are pouring into AI infrastructure.

Capex explained

Capex is money a company uses to acquire, build or improve assets that are expected to provide benefits and be used for several years. Examples can include buildings, manufacturing equipment, vehicles, IT hardware and data centers. By contrast, operating expenses (opex) typically account only for the day-to-day costs of running the business.

When a company is deciding whether to capitalize an expense or not, the basic idea is longevity. Buying equipment that may operate for years is different from paying this month's electric bill. Companies generally capitalize spending for longer-life assets rather than treating everything as an immediate operating expense.

Where can you find capex?

For investors, capex is often easiest to spot on the cash flow statement. Purchases of long-term assets such as property, plant and equipment (PP&E) generally appear as cash outflows within investing activities. Capex can also appear on the balance sheet as an increase in PP&E or other long-term assets. While it doesn’t directly show up as a line item on the income statement, capex does show up as depreciation over time. This can also explain why a company’s earnings don’t reflect capex immediately.

Two important caveats: What counts as capex can differ by company and industry. Some businesses capitalize more software and technology spending than others, for instance. What’s more, not all AI spending is capex. For many companies adopting AI, costs may show up as opex rather than purchases of owned infrastructure.

Investors can find these statements in public company filings available through the Securities and Exchange Commission's EDGAR database.

Capex vs. opex: The difference between them – and why it matters

Operating expenses, or opex, cover the day-to-day costs of running a business, such as payroll, rent, utilities, marketing and supplies. Capex, by contrast, is an investment in long-term assets.

Because opex benefits a business in the near term, the expense is generally recognized in the current period, which typically reduces reported profitability sooner; capex, however, benefits a business over a longer time frame and gets depreciated gradually. That timing difference affects both profitability and cash flow, since a company can spend heavily on capex without having it hit the income statement right away.

For investors, it can be useful to separate growth capex – which funds expansion like a new factory or a wave of data centers meant to capture new demand – from maintenance capex – which simply keeps existing operations running. A company directing capex toward expansion may be positioning for growth, while capex concentrated in maintenance may indicate a focus on sustaining current operations. Neither pattern is inherently preferable.

Either way, there's a trade-off: Higher capex generally involves cash outflows that may pressure near-term free cash flow. The important question is what the company expects to get in return.

Why AI is driving capex higher

Artificial intelligence may feel like a largely digital technology, but running AI at scale typically depends on significant physical infrastructure.

That can include specialized chips and accelerators such as graphics processing units (GPUs), high-speed networking equipment and data storage. Companies may also need data centers with racks of computing equipment, sophisticated cooling systems and access to large amounts of electricity. Expanding that infrastructure can require investment in power supply, grid connections and backup power.

The current environment is characterized by significant AI-related investment, with certain companies spending heavily on AI technology and the infrastructure needed to support it. That investment is extending beyond technology companies to industries supplying everything from data centers to power, while businesses across the economy are adopting AI to improve efficiency. Together, the scale of spending – and the possibility, not yet established, that AI could improve productivity and margins over time – helps explain why investors are paying close attention to capex.

The spending can generally be viewed in three groups:

How to evaluate capex: Metrics and red flags

A large capex number is not inherently good or bad. Investors need context to determine whether spending is productive. The following metrics, for example, can be helpful to consider:

With these metrics in mind, the real question may be whether all that spending eventually pays off.

Certain red flags may indicate that it is not. If capex keeps climbing but revenue and margins aren't following, that's often a sign something isn't working as planned. There's also the risk of simply overbuilding. In a rapidly evolving area such as AI, infrastructure investment may be based on demand projections that prove optimistic. And how the spending is financed matters just as much. Higher interest rates generally increase borrowing costs, which may raise the return a project needs to generate. That may put real strain on big capital programs, especially for companies leaning heavily on debt to fund them.

There can also be positive indicators. Capex may look more compelling when it’s tied to clear customer demand, contracted revenue or measurable productivity improvements. Phased investment plans and rising utilization rates are among the factors investors may consider when assessing capital allocation, though they are not determinative.

The bottom line

Capex can tell investors a lot about where a company is putting its money and what management expects from future growth. Right now, AI-related investment currently accounts for a meaningful share of capital spending among some companies.

None of that makes rising capex good or bad on its own. What matters is whether the spending is tied to real demand – and whether that translates into adequate returns over time. Reading the cash flow statement, comparing capex to revenue and free cash flow, and considering what management says about its future plans may help investors assess whether capex is paying off.

View Disclosures