Capex to sales ratio
Also known as: CAPEX/Sales
The capex to sales ratio measures how much a company spends on , the money that goes into buildings, equipment, data centers, and other long lived , for every dollar of it brings in. A company with $100 billion of that spends $15 billion on has a capex to sales ratio of 15%.
The ratio shows how much of a business's has to be reinvested just to keep it running and growing. Software companies and service businesses often run low single digit ratios, since their main are people and code. Manufacturers, telecom operators, utilities, and cloud providers run much higher ratios, because growth means physically building more capacity first.
The trend matters as much as the level. A ratio climbing well above a company's own history usually means a heavy investment cycle, money spent today in the expectation of later, and that spending comes straight out of in the meantime. Whether that's a good sign depends on what the spending earns: read a rising capex to sales ratio alongside and returns on capital over the following years to judge whether the investment is paying off.