Also called Capital expenditure

Capex

Spending on property and equipment. Reported as a negative number and shown here as the amount subtracted from operating cash flow.

Updated 2026-09-03

Capital expenditure is what a company spent buying or building long-lived assets: factories, servers, aircraft, stores, fitting-out. It is reported as a negative number on the cash flow statement, because it is cash leaving.

It is subtracted from operating cash flow to reach free cash flow, on the reasoning that this money was never available to owners. That reasoning is clearly right for some of it and genuinely arguable for the rest, and the distinction is one of the more consequential unresolved questions in valuation.

Maintenance capex versus growth capex

  • Maintenance capex replaces what wears out. A real cost of staying in business, and correctly subtracted.
  • Growth capex builds capacity that does not yet exist. It is discretionary. A company could stop tomorrow and its cash flow would rise.

Companies do not report the split, so it has to be estimated. The usual proxy is depreciation and amortisation, which is the accounting system's own estimate of how fast existing assets wear out. Capex above that figure is treated as growth spending.

Worked example · AMZN
Operating cash flow$139.51B
Capital expenditure$131.82B
Depreciation and amortisation$65.76B
Capex above D&A$66.06B
Reported free cash flow$7.70B

Amazon on 2026-09-05. Reported free cash flow of $7.70B on a company generating $139.51B of operating cash. Almost the entire difference is capacity being built, not capacity being replaced.

Angie adds part of that gap back through an owner-earnings adjustment, but the add-back shrinks as projected growth rises, because growth capex is the very spend funding the growth already being projected. Counting both in full would be double-counting. Whether the taper is calibrated correctly is an open question and is under external review.

See also

  • Free cash flow — The cash left for investors after keeping the business running. This is the number a DCF actually values, taken from the most recent fiscal year.
  • Operating cash flow — Cash the core business actually generated, before anything is spent on maintaining or expanding it. Harder to massage than reported earnings.
  • DCF base — The figure the projection actually starts from: a trend-fitted or median value across several years, so one distorted year cannot become a runaway base. It can sit far from the latest year.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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