Michael Burry's Palantir Short Thesis: Accounting & Valuation Analysis

Palantir is back in the stratosphere.

The facts have not changed. Yes, FOMO is pushing companies to hire Palantir for now, but its competitive position gets more dire almost by the day.

Palantir filed its 10-K February 17th, and oh it had stories to tell.

Accounts Receivable & Days Sales Outstanding

Palantir’s accounts receivable (AR) is first up. The traditional metric for AR is Days Sales Outstanding (DSO), with higher DSO implying customers are taking their time to pay for Palantir’s services for one reason or another.

In 9 of the last 12 quarters, AR grew faster than revenue – a persistent pattern generally attached to nefarious tricks such as channel stuffing, aggressive revenue recognition, or extended payment terms used as sales concessions. For real subscription businesses, AR growth should track revenue growth closely. When AR is volatile or outgrows revenue, it means the company is booking sales faster than it is collecting cash.

I look to the filings for an explanation, and find something interesting.

2022 10-K (Dec 31, 2022): “No customer represented more than 10% of total AR.” AR was $258 million. This was pre-ChatGPT.

2024 10-K (Dec 31, 2024): A big change. Customer A = 26% of total AR, which stood at $575 million. But no customer is greater than 10% of revenue for the year. That means Customer A contributed less than $287 million in revenue (10% of revenues) but owed Palantir ~$150 million. Revenue could even be much less than $287 million, and closer to $150 million.

Now, Q4 2024 GAAP Net Income was $79 million. If Palantir had to write off 50% of its AR with Customer A, it essentially wipes out a full quarter of GAAP income. That was Palantir’s 5th consecutive quarter of GAAP profitability.

By the way, for that fourth quarter of 2024, Palantir added back about $282 million of SBC expense (to the $79 million GAAP income number) plus another $79.7 million SBC-related payroll taxes to arrive at its “adjusted” earnings number that it presents to Wall Street and Wall Street accepts. I don’t do that.

That adjusted number beat estimates. The GAAP number simply matched estimates.

The $282 million in SBC added back is calculated under ASC 718, which requires estimating the fair value of equity awards at the grant date, not at the date they vest or are exercised.

So, the adjusted number beat estimates on an SBC value assumption. As happens so often on Wall Street. Moreover, my research shows the shareholder cost of stock-based compensation well exceeds that estimate.

In any event, yes, in that circumstance, I am claiming ALL of that GAAP income disappears. This would also increase Customer B’s share of remaining AR since the denominator (total AR) just took a big hit. This is an AR death spiral as now Customer B (and other large customers) would be more concentrated with more bargaining power.

Of course, the write-off would come down the road, not during that same quarter.

That did not happen, yet. Which does not matter.

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When a customer A has 26% of your AR and knows you are a public company hyping your growth and adjusted earnings beats, Customer A acquires a tremendous amount of bargaining power because they know very well that you cannot afford a write-down.

So at contract renewal, the customer can demand price breaks, extended payment terms, and Palantir has to agree. And it doesn’t need to be 26% that triggers such bargaining power. It could be, for instance, 15% of AR.

Customers A’s AR grew from a 15% share to 26% over the course of 2024. Since there was no new disclosure of a customer over 10% of revenue, then either the customer was being invoiced ahead of delivery (channel stuffing) or the customer was not paying on time (or was on extended payment terms).

Neither option is good. One is accounting fraud, and one is a weakening business condition.

Q4 2025 10-K (filed February 17, 2026): Customer A still at 25% of AR, and the 5 year trend of rising DSO is not subtle. The average DSO has almost doubled from 35 days in 2020 to 66 days in 2025, and the year-end DSO is up 63% from 52 days to 85 days during that time.

This has coincided with the emergence of Customer A’s concentration in accounts receivable.

What we have here, it seems, is a customer holding the leverage because Palantir’s stock price is more fragile than the customer’s budget.

It is possible other customers are large as well and the same dynamic is playing out – a Customer B emerged at 11% of AR in the 3rd quarter of 2025, but slipped back under 10% at year’s end.

This is all about information asymmetry. Rising AR with growth yes, but rising DSO requires investigation.

Consider. Palantir’s government customers are more likely to have a higher AR share paired to a lower revenue share, and in 2018 and 2019, this was the case. Such customers had AR concentrations as high as 42%, with revenue concentrations only as high as 15%.

This asymmetric “small revenue share high AR share” customer fell back below 10% on both counts for the IPO. In 2021 and 2022, no customers, per the Form 10s, had more than 10% of AR or more than 10% of revenue.

Then,

2023, Customer A appears with 15% of AR.

2024, Customer A has 26% of AR.

2025, Customer A has 25% of AR.

At no point during these years does Customer A have more than 10% of revenue. This appears to be the same big government customer from before the IPO.

In the best case, Customer A today accounts for a whopping 7 months of DSO, and that is if the customer is only a hair under 10% of revenue.

If the AR/R ratio for this customer approaches the 2018/19 period’s 3x, DSO could be over 9 months. Or longer.

Any way I slice it, Palantir is losing either bargaining power or it is channel stuffing, or both. The former is a weak business position, and the latter a crime.

Do not laugh. That latter possibility is actually not so far out there. The pattern supports potential channel stuffing perhaps even more than a loss of bargaining position, and again they are not mutually exclusive.

For instance, big government Customer A could be trying to help Palantir stock. Perhaps some decision makers in government have owned and now own Palantir stock.

Maybe Customer A paid down its accounts receivable (from 42% of AR to under 10%) specifically to help the IPO and kept it that way for a few years after the IPO to help Palantir have a good launch as a public company.

If true, Company A would have demonstrated a willingness to help Palantir make its books look better.

That may sound good, but it is most certainly not.

That same big government Customer A of course could also “help Palantir” by allowing channel stuffing that puts Palantir over and above earnings and revenue targets more recently.

Again, Customer went from under 10% of AR to 26% of AR over the last three years. Government is known for taking time to pay, but 7 months, 9 months, 1 year, more than 1 year…and increasing.

As I said, consider.

The 10-K reveals that allowance for credit losses is “immaterial.”

Palantir has no reserves against any of this. This may not matter now, but I would wager this will be the state of things when it does.

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Deferred Revenue Patterns

Ok, here we go. We have nine companies with deferred revenue histograms by quarter over 5 years.

Do you see the pattern that is the kidney punch as to what Palantir is?

Here is the decoder.

Row 1: Palantir (GGGR), Adobe (RRRG), Salesforce (GRRG)

Row 2: ServiceNow (RRRG), CrowdStrike (RRRG), Intuit (RRRG)

Row 3: HubSpot (RRRG), Workday (RRRG), Accenture (GGGR)

Six out of seven SaaS companies show the same precise 1G/3R signature – every single year, without exception. Salesforce is GRRG because its fiscal year ends January 31, but otherwise fits the SaaS pattern. The only two panels that truly do not fit are Palantir and Accenture, the two consultants, and Palantir is now clearly in Accenture’s 3G/1R camp.

Bulls saying it deserves 70x, 90x, 110x revenues because it is a SaaS/Software company needs to explain why this is not.

I will explain why it is.

A true subscription software company like Salesforce or ServiceNow sells annual subscriptions. When a sale is made, a SaaS company books the full sale to deferred revenue – cash received, but not yet counted in sales. The SaaS company then recognizes that revenue and reduces deferred revenue proportionately through each of the 12 months of the contract.

Most SaaS companies also have a concentration of annual renewals in one quarter typically Q4 when most business renewal decisions are made.

So, for SaaS companies, deferred revenue spikes, then falls for three quarters. These are the changes charted above. Green and then three quarters of decline. Again, Salesforce has a January 31 fiscal year end which divides its deferred revenue bump and so is slightly different.

Consultancies do not sell annual subscriptions – they sell engagements such as a 3-month strategy project, a 6-month systems integration project, etc. In most quarters, consultants are ramping new engagements as well as executing existing engagements.

Deferred revenue is generally growing as the consultancy grows, but tends to fall during summer months when completions are high and new engagements are low.

Accenture has this dip in the 2nd quarter every year, and Palantir has this dip in the 3rd quarter every year – matching with the government’s fiscal year-end.

Palantir is clearly doing this, delivering labor and expertise on an ongoing basis, and billing ahead of completion. Its pattern has become more strongly like Accenture’s in recent years.

Now the uppercut. The Deferred Revenue/Revenue ratio at the top right corner of each panel shows every SaaS peer sits at 80-207% (207% being CrowdStrike), Accenture at 31%, and Palantir at 32%.

This is simply because subscription businesses have higher absolute levels of deferred revenue – actually the highest – for all the reasons described above.

Palantir is just not what it claims to be. It is growing so fast for the same reason World Wide Web consultants Razorfish and DiamondCluster grew so fast during the 1995-2000 data connectivity/online FOMO that hit C-suites across America. Everyone is scrambling.

Even if the scramble continues a few more years, the fall will be just as epic, or more so. And the current market cap will prove ephemeral.

To get these articles in more timely fashion, and to get many times the number of articles, chat discussions, and impromptu AMAs, than Iwill publish here, subscribe over at my
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The $17.2 Million Mile High Club

Some have asked me to touch on Palantir as a political and unethical company. That can be a third rail, and I have tried to focus on the business model, the financials, the accounting, and the valuation.

Some aspects, however, fall within my purview here.

For instance, the Financial Times reported this morning on Palantir’s 10-K with a piece entitled, “Palantir CEO Alex Karp has his head in the clouds.”

Alexander Karp, the Company’s Chief Executive Officer, flies on non-commercial aircraft beneficially owned by him (the “Executive Aircraft”) for business and personal travel. During the years ended December 31, 2025 and 2024, the Company incurred expenses related to the use of the Executive Aircraft of $17.2 million and $7.7 million, respectively.

It’s quite the feat to spend
$17.2mn in a year on “business and personal travel”, particularly when the jet’s not even a rental. Jefferies’ analyst Brent Thill runs the numbers:

Assuming use of a mid‑sized jet with an estimated operating cost of ~$7K per hour, this implies roughly 2,457 flight hours, or about 28% of the year spent in the air. Even under a more conservative assumption of a high‑end jet such as a G650 at an estimated ~$15K per hour, the $17.2M still equates to approximately 1,147 flight hours, or ~13% of the year. Notably, this $17.2M figure is more than double Karp’s executive aircraft expense in CY24 ($7.7M) and appears elevated relative to peers, with META CEO spending ~$1.8M and PANW [Palo Alto Networks] CEO spending ~$2.4M on private aircraft travel.

Profligate, egregious spending has long been linked to Palantir under Karp. So, in many ways this is not surprising. It is, however, one of the few concrete signs that we as readers of filings have as to the ethics and the nature of the CEO.

Who Pays Taxes? Not $PLTR

One would think it is notable Palantir lost so much money in the past that it paid zero federal taxes in 2025 on $1.6 billion pre-tax income, its putative third profitable year.

After all, many companies lose money for a time. When they return to profitability, taxes are sheltered because past net operating losses (NOLs) are carried forward to shelter taxes.

The really remarkable part though is that for Palantir, that is literally not even the half of it.

The stock-based compensation (SBC) is so enormous and stock appreciation so parabolic that it creates net operation losses (NOLs) that dwarf operating profits.

U.S. Federal NOLs ballooned to $9.0 billion, up from $5.5 billion, despite $1.6 billion in pre-tax GAAP income. Read that sentence again.

This would mean Palantir’s stock-based compensation-related tax deductions, and to an extent R&D amortization and other tax deductions, in 2025 alone were ~$5.1 billion. Now read that sentence again.

The party does not stop at the Federal level. State NOLs are at $4.8 billion, and UK NOLs are $1.8 billion.

The 2017 Tax Cuts & Jobs Act that in 2022 started requiring companies to capitalize R&D expense. This would normally be Godsend for a software company wanting to show higher current earnings. This is completely irrelevant to Palantir because its stock-based compensation-generated $9 billion in Federal NOLs.

You cannot make this stuff up.

How about this: in 2026, if Palantir’s stock continues to levitate, SBC tax deductions could be an additional $4-$6 billion. Year after that same thing.

Palantir still has 152 million options outstanding, and each one will produce a $135 deduction at a $145 stock price. That is over $20 billion in future SBC tax deductions adding to NOLs in the future, on top of this year’s $9 billion in Federal NOLs, if bulls are correct.

Shareholders are funding employee compensation through dilution.

The government is subsidizing Palantir through gargantuan tax shields.

The 10-K shows two founders and one board member have 10b5-1 trading plans adopted last quarter with the stock near highs that will have them all selling stock for most of the next year.

Palantir cancelled its 2023 $1 billion buyback authorization (with $860 million remaining) after buying back just $75 million worth of shares in 2025.

The stock price funds compensation, generates the tax-shield through NOLs, attracts talent and the hot $PLTR stock generates branding that subsidizes customer acquisition costs.

Cumulative GAAP earnings since the IPO is in the $2 billion range. The value of stock-based compensation transferred to employees during the period is likely greater than $9 billion market value at exercise.

With $PLTR, in so many ways, the stock price is the business model.

Former Forward Deployment Engineers Speak Out

I have been fortunate in that when I say I am looking into something, I get lots of offers to help.

I have to be careful, because I have learned when you engage crazies, they are very hard to disengage.

Every once in a while, the email or text is accompanied by bona fides I cannot ignore.

So it is that I found myself in the possession of an emailed copy of a very long Slack chat between former Palantirians regarding my post, “Palantir’s New Clothes: Foundry, AIP and the Failure of Reason.” The Slack thread is titled, “Palantir Alumni Thread – Reactions to Burry Short Report.” I was told all the contributors are former Palantir engineers, but I cannot confirm that.

They are not financial analysts, so some misconstrued certain claims, such as my RSU-related SBC argument, and R&D treatment. I will not repeat or address those here, but it is easy to understand. They also took issue with the “8 weeks for Foundry” claim. The wording I used is clear that development did not stop after 8 weeks, just that a working product was developed in that time. This matches Steinberger’s account in The Philosopher in the Valley, which I recommend everyone read.

Some other claims are a little confusing. Such as one former FDE saying that I refuse “to engage with the substance of what Foundry/AIP actually does, preferring instead to evaluate the idea that Foundry is AI (despite just being a wrapper around other vendors’ AI).”

Which both misunderstands my point and makes my point.

Another one says “I was nodding my head through some of this, but other parts are just inscrutable...Remember, Palantir R&D is not like normal software company R&D. Remember, the actual work is done not by Palantir’s Foundry but rather by the client’s installed base of third-party software. Palantir does not need to spend on R&D like real software companies.”

Which itself is an inscrutable statement because this is a fundamental claim of mine as well.

I have selected a number of quotes from the chat and listed them below. These are not in chronological order, and each quote is an excerpt. This is not the full conversation and does not represent continuity between any two quotes.

Person C [1:12 PM]: “he hits on a lot of points I do really agree with as a previous comm delta. Particularly about the services vs product aspect and how at least up to 2022 foundry had a really hard time sticking at an org and it was real hard to scale contracts”

Person B [7:40 AM]: “ pltr’s moat imo was the people. for a long time they were able to squeeze together a bunch of smart and hardworking folks.clients weren’t really paying for the software, they were paying for an elite team that will show up at 2 am and work 80h non-stop to fix their problems”

Person R [10:57 AM] “This is enjoyable reading despite the issues people have pointed out. It’s nice to hear the early days (my time there) portrayed accurately, though he misses that some of the incredible money burn came from very wasteful operations, not just the business model.” [MJB edit: I implied as much when I asked where all the money went and pointed out how Palantir throws money around.]

Person I [12:18 PM] Enjoying a cigar and on thumbs. Quick preview makes me chuckle. I don’t often find acknowledgement that P almost ran out of money multiple times.

Person K [7:56 AM] (a critic in general of my piece): “I fear the Palantir of today doesn’t have the ability to discover, much less react to, the very severe talent attrition. The mythical FDE quality of the before times is firmly in the past. A lot of very customer-visible mistakes are being made.”

Person R [11:09 AM]: “ as a former FDE from those days who saw a lot, he is correct to say that the IPO was lying to lump all those costs into R&D. You can’t capitalize first class flights to Sao Paolo.”

Person K [1:21 PM]: “I’m sure challenges could be made to whether every last team dinner and Thursday-Tuesday Gotham ‘colo’ is accurately considered R&D.”

Person F [11:01 AM] “You know what else has changed since ~2023? Anyone with a moral compass can’t justify working there anymore. Not an instant change, but it is getting worse every day since the original ICE fiasco during trump 1. Turns out that smart, competent people tend to be more liberal, more empathetic, more justice-based, and in favor of western and liberal values. That used to attract talent and now it is doing the opposite.”

Person B [7:40 AM]: “it’s been super noticeable since ~late 2023 with the quality of hires dropping and the most elite leaving or not even joining”

Person C [1:29 PM] “Palantir clearly jumped on the AI bandwagon in a way that for everyone in the company for the 5 years before must have felt like super whiplash. But I don’t begrudge that. Fair enough. And it’s likely true the foundry data foundation provides the optimal thing to use AI on, but damn rebranding Foundry to AIP was bandwagon to the max.

Person K [1:32 PM] “The whiplash is from the company line pre-ChatGPT being “AI is a distraction, data integration and ontology is what’s important”. Ironically, that remained true, while the marketing shifted dramatically.”

Overall, the Slack chat content did a lot to help my thesis.

Separately, a former FDE told me that “Foundry/Gotham is a lock in where Palantir then closes off the systems if a customer decides to leave.”

This has long been the story – Palantir’s stickiness with customers is not having a great product, but its obstruction of the exit ramp. Even so, as Person C said in the Chat, Foundry had a really hard time sticking with customer/organization. Getting customers to Scale up until 2022, at least, was very hard, he said.

My NDR data in the original post showed a decline into 2023, and I had pointed out that was indicative of a broken business model and high churn. That point is validated by these former FDEs.

Back in 2017, the NYPD alleged that Palantir was not cooperating with its attempts to discontinue its engagement. Eventually, per the Steinberger book, all police departments in the country left Palantir. Per a news report, at least one, in New Orleans, followed the NYPD in creating its own app for what Palantir did.

A former FDE also told me, “Foundry is not a perpetual license, you have to be trained to use it, even then you require heavy lift and continuous support.”

This matches the “80h non-stop” comment above that said clients were not paying for software, but for the FDEs/implementation consultants.

Overall, I have yet to hear from former Palantir engineers telling me my thesis is wrong.

I am left more convinced that Palantir does not earn the margins it says it does, does not have the earnings it says it does, and does not have the software subscription model it says it does.

Palantir is a consultant riding a bubble of AI FOMO demand, and will trade well below $100 billion market cap in my opinion. In the long run, revenues shrink, and it is likely acquired for relatively cheap. That is, after all, what happened to DiamondCluster and Razorfish.

Diamond was a struggling tech consultancy business, but pivoted hard as a World Wide Web consultant in 1997 and business exploded. Grew 60-70% CAGR through 1997-2000. The stock rose 300% in 1999. Market cap hit $2 billion. Got so cocky it bought a European operation Cluster for nearly $1 billion in cash and stock late in 2000. DiamondCluster was born,.

By the second half of 2001 DiamondCluster stock was down 88%, even though revenues initially only flattened. Revenues then fell, and the stock in late 2001 into 2002 traded at just 1x sales. In 2006, they sold the Cluster European operation, which they had bought for $1 billion in 2001, for $35 million. PwC bought the remainder for a de minimus amount, so small that it was never disclosed, in 2010.

Razorfish was a pure World Wide Web consultant, a comp to Palantir’s AIP. Razorfish IPO’d at $16sh in April 1999, doubled to $32 first day. The company hit a $4 billion market cap as sales grew 57% from 1999 to 2000 after growing 1,130% from 1998 to 1999. But sales then fell from $268 million to near zero in under two years. Razorfish was delisted in 2003.

Both companies had traded to about 20x sales at their peaks.

I do believe today’s AI Consultancy arc will play out in similar fashion. A rhyme, to some extent, if not a repetition. Palantir has climbed higher, and has further to fall.

Next up is Palantir: An Acccouning at the halfpoint of 2026. I will analyze the 10Qs and history in a similar manner to find patterns that most do not.

Palantir: An Accounting