Capex is short for capital expenditures: money a company spends on long-lasting things like buildings, servers and equipment, as opposed to day-to-day costs like salaries and rent. Instead of counting the whole cost at once, a company spreads it over the years the asset will be used, which is called depreciation.
Big Tech's AI build-out has turned capex into a headline number. In its third-quarter report on Oct 28, Alphabet said capex was $51.36 billion, and its free cash flow (cash from operations minus capex) was negative $9.07 billion, a much bigger shortfall than the $2.70 billion analysts expected. It kept its 2026 capex forecast at $195 billion to $205 billion and said spending will rise significantly in 2027. Its shares fell about 10% in after-hours and premarket trading. Microsoft reported the same evening: capex and finance leases came to $45.2 billion, below analyst estimates, and free cash flow stayed positive at $18.63 billion. Its shares rose roughly 3% to 4% outside regular hours.
The takeaway for beginners: high capex isn't automatically good or bad. It's a bet that spending now brings in more money later, and investors weigh the size of that bet against how much cash the business is still producing. That's why two companies spending on similar things can get very different reactions on the same day. Got a question about capex, cash flow or reading an earnings report? Ask below. There are no silly questions here.
Sources: Alphabet Q3 2026 earnings release (SEC filing, Oct 28, 2026); CNBC, Oct 28 and Oct 29, 2026; Reuters via Investing.com, Oct 28, 2026; Euronews, Oct 29, 2026; Investopedia, "Capital Expenditure (CapEx)".
John Murray
A good habit for beginners: when a big spending number makes headlines, check how much cash the business still has and what the spending is meant to build before forming an opinion. A few minutes with the earnings report beats reacting to the headline alone.
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