2026 Accounting Shift

CapEx vs OpEx in the IT Budget

IT spend has inverted from CapEx-dominant in 2010 to OpEx-dominant in 2026, now 65 to 70 percent OpEx. Cloud, SaaS and managed services drove the shift. The accounting, planning and CFO-conversation implications matter for how IT budgets are structured and approved.

OpEx Share (2026)

65 - 70%

Cloud, SaaS, managed services, salaries

CapEx Share (2026)

30 - 35%

End-user devices, networking, residual servers

The Inversion: 2010 to 2026

The 2010 IT budget at a typical enterprise was 60 to 70 percent CapEx. Servers, storage and networking were depreciated over 3-5 years. Perpetual software licences were capitalised. Internal projects that built systems were capitalised under ASC 350-40 (US GAAP) or IAS 38 (IFRS). The CFO conversation was largely about capital plans and depreciation schedules.

By 2026 the proportions have inverted. Three forces, all maturing between 2014 and 2022, drove the change:

Cloud computing converted infrastructure CapEx to OpEx. Workloads moved from owned servers (depreciated capital) to consumed cloud services (operating expense). The conversion is not 1:1 in cost (cloud is often more expensive on a fully-loaded 5-year basis) but the financial flexibility was usually judged worth the premium.
SaaS converted perpetual licences to subscriptions. Microsoft, Adobe, Salesforce and most major enterprise software vendors moved from selling perpetual licences (CapEx) to per-seat subscriptions (OpEx). Customers had little choice as the perpetual versions were sunset.
Managed services and outsourcing converted internal labour to vendor spend. Help desk, infrastructure operations, security operations, and increasingly engineering work moved to managed services providers, MSPs, MSSPs and offshore vendors. The vendor relationships are OpEx in the consuming company's budget.

All three forces compounded. By 2022 most enterprise IT budgets had crossed 50 percent OpEx; by 2026 the ratio is 65-70 percent OpEx for typical mid-market and large companies. The remaining CapEx is concentrated in end-user devices, networking, and the residual on-premise estate.

What Counts as What

The accounting classification of an IT expense depends on accounting standards (US GAAP via FASB, international via IFRS) and company policy on capitalisation thresholds. Below is the typical 2026 classification at a mid-market US enterprise. International companies should reference IAS 38 and IAS 16 for software and hardware capitalisation.

IT Spend Category	CapEx?	Notes
End-user devices	Yes (typically capitalised)	Laptops, monitors, mobile phones above company materiality threshold. 3-5 year depreciation.
Networking equipment	Yes	Switches, APs, firewalls, routers. 5-7 year depreciation.
On-premise servers and storage	Yes	Where they remain. Most general-purpose has migrated to cloud.
Data centre fit-out	Yes	Power, cooling, fire suppression. Building improvements typically 7-15 year depreciation.
Internal software development (capitalised)	Sometimes	Engineer time building internal-use software, capitalised under ASC 350-40 (US) or IAS 38 (international).
Perpetual software licences	Yes (where they exist)	Most have migrated to subscription. Remaining perpetual usually depreciated over 3-5 years.
Cloud subscription (AWS / GCP / Azure)	No (OpEx)	Consumed services, expensed in the period.
SaaS subscriptions	No (OpEx)	M365, Salesforce, etc. Expensed as incurred.
Managed services / MSP retainer	No (OpEx)	Consumed services. OpEx in the period.
IT personnel salaries	Mostly OpEx	Capitalised when working on capitalisable projects (ASC 350-40 / IAS 38). Default OpEx.

Classification typical for mid-market US enterprises following FASB ASC standards. International companies should reference IAS 38 for intangibles and IAS 16 for property, plant and equipment.

Implications for IT Budget Planning

The CapEx-to-OpEx shift changes how IT leaders should plan, forecast and present budgets. Five practical implications:

Forecast accuracy is harder. CapEx-heavy budgets had multi-year capital plans with predictable depreciation. OpEx-heavy budgets ride headcount changes (per-seat SaaS), annual price increases (subscription renewals), and consumption growth (cloud). Rolling 12-18 month forecasts updated quarterly are now essential.
FinOps and SaaS portfolio management are real disciplines. Cloud spend can drift 20-30 percent above plan without active management. SaaS subscriptions accumulate quietly through departmental purchases. Both need named owners and tooling (Apptio, Cloudability, Vendr, Zylo, Productiv) at any company spending more than $5M/year on either category.
CFO conversations shift in tone. Less focus on capital project approval, more focus on growth rates of recurring spend. The annual budget conversation is more about percentage growth in OpEx than about specific capital items. CIOs need to be ready for 'why is OpEx growing faster than revenue?' as a recurring question.
EBITDA optics are different. CapEx does not hit EBITDA in the year incurred (it depreciates). OpEx does. The shift to OpEx has compressed EBITDA margins at companies that have moved aggressively to cloud and SaaS, even when total cash spend is unchanged. CFOs and investor relations teams should be aware of the comparability impact.
Project capitalisation rules matter more. Internal-use software development can be capitalised under ASC 350-40 / IAS 38 if specific criteria are met. Disciplined application of these standards (capitalising the right portion of engineering project time) can improve EBITDA optics for shareholders without changing cash flow.

Industries Where CapEx Still Dominates

Not every industry has shifted at the same pace. Capital-intensive industries with significant on-premise infrastructure remain more CapEx-heavy than the cross-industry average.

Industry	OpEx Share	CapEx Share	Notes
SaaS / technology	80 - 88%	12 - 20%	Almost entirely cloud and SaaS. End-user devices the main CapEx.
Professional services	72 - 80%	20 - 28%	SaaS-heavy stack, multi-office networking is the main CapEx.
Financial services (typical)	65 - 72%	28 - 35%	Branch and ATM infrastructure, residual core banking on-prem.
Healthcare provider	60 - 68%	32 - 40%	EHR licensing partly perpetual, medical device estate is CapEx.
Retail (omnichannel)	55 - 65%	35 - 45%	POS estate, store networking, in-store devices are large CapEx.
Manufacturing	48 - 58%	42 - 52%	OT equipment, plant networking, ERP infrastructure all CapEx.

Software vs Hardware

The category dimension of the same shift.

IT Hardware Budget

Most of the remaining IT CapEx.

Cloud Spending

The biggest source of new IT OpEx.

Full Budget Breakdown

Five-category allocation context.

IT Budget for 5,000 Employees

Where the inversion is most visible at scale.

Managed Services Cost

A major source of OpEx growth.

Calculate your IT budget

The calculator outputs a five-category breakdown that lets you map each line to CapEx or OpEx for your accounting framework.

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Frequently Asked Questions

What is the CapEx vs OpEx split in IT budgets in 2026?

Roughly 30 to 35 percent CapEx and 65 to 70 percent OpEx for typical mid-market enterprises in 2026. The split has inverted from 2010 when CapEx was 60-70 percent. Three structural shifts caused the change: cloud computing converting infrastructure CapEx to consumed-service OpEx, SaaS converting perpetual software licences to per-seat OpEx, and outsourcing/managed services converting internal labour CapEx (when capitalised in projects) to vendor OpEx.

What still counts as CapEx in IT in 2026?

Five main categories. First, end-user devices (laptops, monitors, mobile phones) when capitalised over 3-5 year depreciation. Second, networking equipment (switches, access points, firewalls, routers). Third, on-premise servers and storage where they remain (data centres, edge compute, OT environments). Fourth, capitalised internal-use software development (typically engineer time on building internal systems). Fifth, large enterprise software perpetual licences where companies have not yet migrated to subscription. Outside these, most of what gets approved as IT capital today is in active decline.

Why does the CapEx vs OpEx classification matter?

Three reasons. First, CapEx is depreciated over multiple years (typically 3-5 for IT assets) so the impact on net income is spread out, while OpEx hits the income statement in the year it is incurred. Second, CapEx historically had stricter approval gates (capital plans, board approval thresholds) while OpEx flows through operational budgets. Third, EBITDA, free cash flow and other financial metrics treat CapEx and OpEx differently, affecting how the IT budget interacts with corporate financial planning.

Is OpEx more expensive than CapEx over time?

Often yes, in absolute total cost terms. A perpetual software licence amortised over 5 years frequently costs less than 5 years of subscription. A purchased server amortised over 5 years often costs less than 5 years of cloud hosting for an equivalent workload. The reasons companies still prefer OpEx: cash flow predictability, no upfront capital outlay, automatic refresh and updates, no salvage management, and the ability to scale up or down without stranded capital. The trade-off is real but most companies have decided OpEx flexibility is worth the premium in most cases.

Are companies trying to convert OpEx back to CapEx?

Some, in specific cases. Predictable, steady-state cloud workloads can be cheaper to run on owned bare-metal infrastructure (think reserved compute at 90 percent utilisation 24x7), and a few companies have moved workloads back from cloud for cost reasons (37signals, Dropbox before them). But these are exceptions. The default for new general-purpose IT investment in 2026 is OpEx via cloud and SaaS. Where CapEx is genuinely cheaper, it is usually in narrow workload patterns rather than as a strategic position.

How does the shift affect IT budget planning?

Three changes. First, annual budgets are more sensitive to renewal pricing, consumption growth, and headcount changes than to capital project timing. Second, budget owners need rolling forecasts and consumption-tracking discipline (FinOps for cloud, SaaS portfolio management for software) rather than annual capital plans. Third, the CFO conversation shifts from 'approve this multi-year capital project' to 'explain why OpEx is growing faster than revenue' which is a different and ongoing dialogue.