Maintenance capex

Maintenance capex is the portion of capital expenditures required to sustain the current productive asset base — replacing equipment as it wears out, refreshing IT, repairing real estate. It is the spending the business must do to stay where it is, distinct from growth capex which expands capacity. Maintenance capex is the line that gets deducted in the owner-earnings construct to derive a steady-state cash measure. The standard approximation is that maintenance capex equals depreciation expense in steady state — a defensible proxy for businesses with stable asset turnover, but not a great one for businesses experiencing capex inflation (replacing assets at higher prices than the historical cost they are depreciating against) or deflation (cloud-era IT). We use depreciation as a starting baseline and adjust upward for inflation-affected industries and downward for software businesses where the asset base is depreciating against truly stale historical costs. The split between maintenance and growth capex is rarely disclosed; management commentary and capital-intensity trends are the main triangulation tools.