CapEx vs OpEx
CapEx and OpEx are how finance classifies spending. The choice changes the P&L, the tax bill, and how the spend shows up to investors.
The key difference: CapEx buys long-lived assets and is depreciated over time. OpEx covers the day-to-day cost of running the business and hits the P&L immediately.
| Dimension | CapEx | OpEx |
|---|---|---|
| Type of spend | Buildings, equipment, owned software | Salaries, SaaS subscriptions, rent, utilities |
| P&L treatment | Capitalised, depreciated over years | Expensed in the period |
| Impact on EBITDA | Doesn't hit EBITDA directly — depreciation is below the line | Hits EBITDA in full |
| Cash flow timing | Big outflow up front | Steady outflows over time |
| Investor view | Investment in future capacity | Cost of operating today |
When to use CapEx
Classify as CapEx when the asset will produce value for more than one accounting period and meets your capitalisation threshold.
When to use OpEx
Classify as OpEx when the spend is consumed inside the period — including most cloud, SaaS and labour.
FAQs
Why do CFOs prefer OpEx for software?
Predictable monthly OpEx is easier to budget, scales with usage, and avoids long depreciation schedules. It's the reason cloud beat on-prem.
Is cloud spend always OpEx?
Usually yes. Some long-term reserved instances or capitalised cloud projects can be classified as CapEx under newer accounting guidance, but most pay-as-you-go cloud is OpEx.
Does OpEx or CapEx hurt EBITDA more?
OpEx — because EBITDA is calculated before depreciation. The same dollar spent as CapEx leaves EBITDA untouched in the year of purchase.