Google is getting better at communicating, and this quarter's 10Q sheds some light on one of the most pressing questions about the company: Where all that CAPEX is going. The 10Q provides a breakdown of some $332 million in Q1 CAPEX, and although this doesn't quite tie to the $344 million on the cash flow statement, it's pretty close.
The breakdown should relieve concerns (such as mine) that the company is spending hundreds of millions on dark fiber, NORAD-style data centers, frivolous engineering projects, etc. It should increase concerns that the company is building seaside Googleplexes equipped with personal heliports. To wit:
|Information technology assets||112,039|
|Construction in process||138,374|
|Land and buildings||41,182|
|Furniture and fixtures||1,786|
$112 million on servers is still a lot of money, but it is more comprehensible than, say, $1.5 billion. $180 million on land, buildings, and construction is, sarcasm aside, probably reasonable for a company of this size, especially one playing catch-up on the infrastructure side (and Google is probably also smart to use its cheap capital to buy the land and buildings outright, although one imagines it could have gotten rock-bottom lease terms). $40 million in "leasehold improvements" also seems reasonable, as does $1.8 million in Aeron chairs.
So maybe the outlook for free cash flow growth isn't as bad as it seemed. Unless Google plans to become a REIT, approximately $750 million of the $1.5 billion in CAPEX estimated for this year should disappear. When/if it does, this will provide a nice lever for cash flow acceleration.