Revisiting capex

When we last examined Facebook’s capex, we observed that year-over-year the company’s spending on property and equipment has been declining. We concluded that the reduction in network infrastructure spending reflected a maturation of the company’s infrastructure and platform. Facebook’s somewhat modest FY 2013 capex bears out this thesis. However, Facebook’s WhatsApp acquisition raises questions about capex going forward.

Facebook estimated that capex in 2013 would grow at only 12%, totalling an estimated $1.8B (later revised down to $1.6B). As we noted previously, this would reflect a slowing capex growth rate. In fact, a combination of efficiency investments on the hardware and the software side have further driven down realized capital spending in the year. According to its 10-K, as a result of these investments, total capex was a more modest $1.36B.

By tracking the historical cost of Facebook’s property and equipment we can see that the majority of capital spending is directed to growing or maintaining the company’s network infrastructure. This includes the purchase or lease of servers and other network equipment, and building costs for Facebook’s growing list of data centers. This also explains the bulk of the decline in capex over the year, with only a small increase in nominal cost in Q4 2013.

Facebook's quarterly property and equipment historical cost

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