Azure Reserved VM instances are an example of OpEx or CapEx?

Question

My Answer: Some people mistakenly consider reserved instances as CapEx because they require upfront payment. However, since you don’t own the infrastructure, it remains OpEx.

But the answer is a different from site to site.Please clarify.

Answer 1

AFAIK, your answer is correct. Azure Reserved VM Instances (RIs) are an Operational Expenditure (OpEx), not Capital Expenditure (CapEx).

Even though Reserved Instances require upfront payment (which might resemble a capital expense), they do not involve ownership of physical assets. Instead, they are a commitment to use Azure's infrastructure over a period (e.g., 1 or 3 years), which aligns with the pay-as-you-go, service-based model of OpEx.

CapEx typically applies when purchasing physical servers or data center equipment, where the cost is capitalized and depreciated over time. Since Azure RIs are just a discounted pricing model for cloud services rather than asset ownership, they remain OpEx.

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hth

Marcin