I covered Michael Burry‘s first Palantir short thesis on June 4, when he called the stock a “sand castle” trading at 16 times intrinsic value.
The stock dropped sharply the following day. Then Palantir reported one of the most extraordinary quarters in enterprise software history.
On top of that, Palantir surged 64% from its June low of $106 to the current $175, and the bears — including Burry — faced intense pressure.
On Monday, August 10, Burry responded by doubling down.
Writing in his Cassandra Unchained report, Burry disclosed that he purchased March 2027 Palantir put options struck in the low-to-mid $100 range, taking advantage of implied volatility falling to multi-month lows to rebuild his bearish position at cheaper option prices.
His long-term verdict on the stock was stark: under $1. Yes, you read it right, it’s not a typo.
Palantir (PLTR) trades near $175.52 at a market cap of approximately $420 billion, according to Yahoo Finance. The company has a trailing price-to-sales ratio of 73.19 and a forward P/E of 112.36.
Burry is betting against those numbers. Palantir is betting investors should ignore them.
What Burry is actually arguing — the accounting gap and off-balance-sheet commitments
Burry’s bear case has evolved beyond valuation multiples. He now points to two specific accounting issues he says the market is not pricing correctly.
First, stock-based compensation. Burry noted that Palantir issued 31.3 million shares to staff, worth approximately $5 billion over the past year, representing roughly six times the company’s reported stock-based compensation expense.
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He described this as the widest accounting gap among 66 companies he recently reviewed. The implication is that Palantir’s reported earnings metrics look stronger than they would if total shareholder dilution were fully reflected.
Second, off-balance-sheet commitments. Non-cancellable infrastructure purchase obligations have more than tripled this year, according to Burry‘s analysis.
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These long-term committed expenditures do not show up prominently in current earnings but represent future cash outflows that constrain the business’s financial flexibility.
Combined with the SBC gap, Burry argues the true economic picture is dramatically less favorable than the headline numbers suggest.
Trading at 69 times sales, he concluded the intrinsic value is under $1 in the long run.
The “otherworldly” Palantir quarter Burry is betting against
Here is the genuine complication in Burry’s trade. The Q2 2026 results, reported August 3, were, by several measures, the most impressive Palantir has ever delivered, according to its Q2 fiscal 2026 earnings release.
- Total revenue reached $1.935 billion, up 93% year-over-year (YOY)
- U.S. commercial revenue grew 149% YOY to $764 million
- U.S. government revenue grew 90% YOY to $809 million
- GAAP net income was $1.062 billion, representing a 55% margin
- Adjusted free cash flow was $1.220 billion.
- The company’s Rule of 40 score — the sum of the revenue growth rate YOY and the adjusted operating margin for each of the periods presented — reached 155%.
Full-year 2026 revenue guidance was raised to $8.150 billion to $8.158 billion, representing 82% year-over-year growth. U.S. commercial revenue guidance was raised to over $3.424 billion, representing at least 134% growth.
Impressive, right? In fact, CEO Alex Karp did not underplay the results.
Related: Palantir’s blowout quarter creates dangerous new question
“Our entire business nearly doubled in the span of 12 months,” Alex wrote in Palantir’s investor letter.
On the earnings call, he told analysts to “forget consensus” and argued that no business at Palantir’s scale has ever grown half that fast. He called Q2 “otherworldly” and projected the growth pace would continue.
Those are bold statements. In fact, they are backed by numbers and facts hard to dismiss.
The tension at the center of the Palantir debate
I want to be direct about what makes this one of the genuinely difficult investment debates in the current market.
Burry is not arguing that Palantir’s AI Platform does not work, or that its government contracts are not real, or that its customer growth is manufactured.
He is arguing that the accounting structure around the earnings inflates the reported quality of those results, and that the valuation priced in for any scenario where things go slightly less well than perfect is effectively zero margin of safety.
Related: Michael Burry issues blunt warning as he bets against 2 AI favorites
Palantir’s own data validates the business momentum. At the same time, it is supporting Burry’s valuation concern. The company’s year-to-date return is negative 1.77%, and its one-year return is negative 4.42%, according to Yahoo Finance, despite generating $1.2 billion in quarterly free cash flow and growing revenue 93% year over year.
The market has not re-rated the stock higher even as fundamentals accelerated, suggesting the 73x sales multiple was the ceiling, not the floor.
The options positions Burry entered — March 2027 strikes in the low-to-mid $100s — give him several months for the valuation to compress.
If Palantir grows into its multiple without a price correction, the puts expire worthless. If the market eventually decides that 70-plus times sales is too much to pay even for a company growing at 93%, Burry collects.
Both outcomes are plausible. That is what makes this one interesting to watch closely.
Related: Michael Burry just sent a fresh signal to stock market investors
