AZ-900 Describe cloud concepts Practice Question

Answer analysis

Option-by-option breakdown

For each option: why learners choose it and why it is or isn't the right answer here.

• ✗

  CapEx is for cloud spending; OpEx is for on-premises spending

  Why it's wrong here

  The statement maps the spending models backward. Cloud adoption generally shifts spending from CapEx to OpEx because cloud services are rented and billed on a recurring, usage-based basis without owning the underlying hardware. On-premises deployments often involve significant CapEx for servers and networking gear, but they also generate OpEx for electricity, cooling, maintenance, and IT staffing. Therefore, neither spending type is exclusive to one environment; rather, cloud is typically OpEx-dominant, while on-premises mixes both CapEx and OpEx.

• ✓

  CapEx is upfront investment in owned infrastructure; OpEx is ongoing pay-as-you-go service costs

  Why this is correct

  CapEx (capital expenditure) involves large, upfront investments to purchase or build physical assets such as servers, storage arrays, and data center facilities that the organization owns and depreciates over time. OpEx (operational expenditure) instead represents recurring, consumption-based costs for services that are metered and billed as used, such as cloud virtual machines, storage capacity, and network bandwidth. In a cloud model, you trade the high-initial capital outlay for scaled operational payments, avoiding asset ownership and long-term depreciation cycles.

• ✗

  CapEx and OpEx are identical in cloud environments

  Why it's wrong here

  CapEx and OpEx are fundamentally different financial categories and remain distinct even inside cloud environments. CapEx creates a balance-sheet asset that is capitalized and depreciated, whereas OpEx is an income-statement expense recognized in the period incurred. Although cloud providers offer pricing mechanisms like reserved instances or savings plans that involve upfront commitments, those payments are still classified as operational service charges rather than purchases of owned infrastructure, so the two concepts are never identical.

• ✗

  OpEx covers hardware costs; CapEx covers software licensing costs

  Why it's wrong here

  This option reverses the correct association. CapEx typically includes the purchase of physical hardware such as servers, network switches, and storage systems, along with perpetual software licenses that are capitalized as assets. OpEx covers the ongoing costs to run and consume technology, including cloud subscription fees, pay-as-you-go usage charges, maintenance contracts, and utility bills. Software licensing can be either CapEx or OpEx depending on the license model—perpetual licenses are capitalized, while subscription licenses are operational—but the claim that OpEx covers hardware is incorrect.