Learn · Explainer

Capex vs. operating expenses

The difference between capital expenditures and operating expenses, with Apple's and Microsoft's latest 10-Ks as examples.

The short answer

Capital expenditures, or capex, are payments to buy or build long-lived assets such as buildings, equipment and data centers. Operating expenses, sometimes called opex, are the day-to-day costs of running the business (research, marketing, wages and the like) that are charged to the income statement as they are incurred. The same kind of spending can sit on either side of the line, depending on whether accounting rules treat it as an asset or as a period cost.

Where each one appears

Capex is on the cash flow statement, in the investing section, usually as payments for property, plant and equipment. The asset then sits on the balance sheet and is depreciated over its useful life. Capital expenditures covers the figure in more detail.
Operating expenses are on the income statement, below gross profit: research and development, selling, general and administrative costs, and similar lines. They reduce operating income in the period they are incurred.

Some costs that feel like investments are still expensed. Research and development is the usual example under US accounting rules: it is almost always an operating expense, not capex, even when the company is building the next generation of a product. Software developed for the company's own use can, under certain conditions, be capitalized, and the 10-K's accounting policies note describes the treatment.

Apple and Microsoft

Apple's latest 10-K reports payments for acquisition of property, plant and equipment of $9.0B, and lists research and development of $45,765 million and selling, general and administrative expenses of $29,774 million, for total operating expenses of $75,539 million. In that year Apple's R&D alone, $45.8B, was larger than its capex.

Source: Apple 10-K for fiscal 2026, filed Nov 3, 2026

Microsoft's 10-K reports capex (additions to property and equipment) of $115.9B, 34.9% of revenue, a much heavier capital program, reflecting spending on data centers and related infrastructure.

Source: Microsoft 10-K for fiscal 2026, filed Jul 29, 2026

The contrast is about the mix of spending, not about which company is doing better. A software or devices business may expense a large share of its investment as R&D; a utility, a retailer adding stores or a cloud provider building data centers will show more capex relative to revenue. Across the 69 companies that report capex here, the median is 3.9% of revenue.

Why the distinction matters when you read a 10-K

Capex does not reduce net income in the year it is paid; depreciation does, over the asset's life. Operating expenses reduce income immediately.
Capex is subtracted when arriving at free cash flow. Operating expenses have already flowed through operating cash flow, after the non-cash items are adjusted.
Companies sometimes highlight 'investments' that mix capex and expensed items. The cash flow statement and the income statement still keep them apart.

Common questions

What is the difference between capex and opex?

Capex is spending on long-lived assets, recorded on the balance sheet and paid out in the investing section of the cash flow statement. Opex is operating cost charged to the income statement as incurred.

Is research and development capex or opex?

Under US accounting rules, most R&D is an operating expense, even when it is intended to create a long-lived product. Some internal-use software can be capitalized.

Does capex reduce net income in the year it is paid?

No. The cash leaves in that year, but the income statement is charged later through depreciation, over the asset's useful life.

Where do I find each figure?

Capex is on the cash flow statement as payments for property, plant and equipment. Operating expenses are on the income statement, typically as R&D and selling, general and administrative lines.

Why do some companies have much higher capex than others?

It follows the business. Data centers, stores, factories and networks require more capex relative to revenue than a business whose main investment is people and R&D.

Disclosures

Editor holdings: The editor holds shares of Tesla (TSLA) and SpaceX in a long-term retirement account. The editor holds no position in any other company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.

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