How this is calculated

A /16 means the first 16 bits are the network portion, leaving 16 bits for hosts (2^16 = 65,536). In practice, you'd almost never put 65,000 devices on a single flat subnet; broadcast traffic alone would cripple performance. Instead, /16 blocks are almost always sub-divided into smaller subnets (/20, /22, /24) for different departments, floors, or security zones. The /16 acts as a supernet or summary route that encompasses all the smaller subnets underneath it.

Verdict

A /16 is a planning container, not a subnet you'd actually assign to a single broadcast domain. Use it as the top-level allocation for a large site, then subnet it down to /22 or /24 for actual deployment. In cloud environments, a /16 VPC gives you room to carve out /20 subnets per availability zone.