Michael Burry Is Betting Against Palantir Again—Should Investors Care?

Key Points

• Michael Burry purchased new out-of-the-money put options on Palantir stock expiring in March 2027, renewing his prior bearish bet against the company.
• Burry's thesis centers on Palantir's expensive valuation and his claim that the company underreports stock-based compensation, which he estimates at about $5 billion annually.
• Despite Burry's concerns about dilution, Palantir posted 93% revenue growth, expanding margins, and strong free cash flow, suggesting the stock remains worth holding through volatility.

Michael Burry is at it again. The investor who became legendary as “The Big Short” is doubling down on his bearish position in Palantir Technologies NASDAQ: PLTR. In his Substack newsletter, Cassandra Unchained, Burry announced his purchase of out-of-the-money put options on PLTR stock expiring in March 2027. The contracts reportedly have a strike price in the low- to mid-$100 range.

If Burry’s bearish bet is right, PLTR would dip down to the levels it was at in late June. On the one hand, it’s easy to see why Burry would short PLTR. The stock is up about 30% in the last 30 days. Most of that gain came after the company’s Q2 earnings report, which was stellar by nearly every measure.

Revenue grew 93% year-over-year to $1.94 billion, U.S. commercial revenue jumped 149% to $764 million, and the company closed 220 deals worth at least $1 million. Adjusted free cash flow came in at $1.22 billion, a 63% margin, with $9.2 billion in cash and no debt on the balance sheet.

It’s Really More of the Same From Burry

In the interest of accuracy, this isn’t a new trade for Burry. Essentially, Burry is rebuilding his earlier bearish bet, one that he partially covered when PLTR hit $107 in June. In this case, Burry is taking advantage of cheaper premiums to take a second bite at the apple.

The question is why. Burry doesn’t offer a new rationale, so it’s a continuation of two major themes:

• Valuation – Burry has likened Palantir’s current valuation to a “sandcastle.” He estimates that PLTR is trading 16x above its intrinsic value and has said the stock will be worth under $1 in the long run. Hyperbole aside, by conventional metrics, Palantir is expensive.

• Accounting Concerns – Ever since Palantir went public via a direct listing in 2020, many investors have been concerned about the company’s heavy reliance on stock-based compensation. Burry believes that the company is underreporting the level of that compensation, which he puts at approximately $5 billion in the past year.

Breaking Down Burry's Bet

The valuation question is not new and will continue to be an issue for some investors until it’s not. Analysts have been raising their price targets for PLTR, which now has a consensus price target of $192.19.

Stock-based compensation is a trickier issue. Burry's argument hinges on real accounting mechanics. Using generally accepted accounting principles (GAAP), stock-based compensation is expensed at its grant-date fair value, then spread over the vesting period. This is regardless of what the stock is worth by the time those shares actually land in an employee's account.

If Palantir granted restricted stock units (RSUs) when shares traded in the $30s or $40s, the income statement only ever reflects that original, pre-rally value. The market value of the shares, once they vest and are issued, can be much higher. That gap is real, and it's the source of Burry’s "underreporting" claim.

But is the pace of that compensation actually accelerating? Quarterly GAAP stock-based compensation expense has climbed in five straight quarters: roughly $155 million in Q1 2025, up to $265 million in Q2 2026, including a 32% sequential jump in the most recent quarter.

That said, annual comparisons are muddier, complicated by a one-time acceleration in 2024 tied to Market-Vesting Stock Appreciation Rights (SARs) that triggered once the stock closed above a $50 threshold. But the recent quarterly trend is unambiguous: the dollar cost of comp is rising and rising faster than in prior quarters.

None of this shows up as a cash cost, though. Stock-based compensation is a non-cash expense, added back on the cash flow statement, which is exactly why Palantir's free cash flow keeps climbing even as the comp bill grows.

The real cost to shareholders is dilution. Each vested RSU adds a new share to the count, and Palantir's diluted share count has grown to roughly 2.57 billion. Aggregate free cash flow rising doesn't tell you whether free cash flow per share is keeping pace, and per-share is what ultimately drives your return as an investor.

Why Palantir Is Still Worth Owning

Ultimately, the proof is in the performance. Palantir continues to deliver strong year-over-year growth in every important and measurable category. That includes a Rule of 40 score of 155%, up from 68% just two years ago. That trajectory outpaces every other top 100 company by market cap, including NVIDIA NASDAQ: NVDA.

That's important to remember when thinking about Burry’s bearish bet. He isn't wrong that dilution is real, that GAAP comp expense understates the market value of what's being handed out, or that the stock is expensive on a price-to-sales basis.

But "expensive" and "overvalued" aren't the same claim, and a company growing revenue 93% while expanding margins and generating over a billion dollars in quarterly free cash flow is not the profile of a business running on accounting sleight of hand.

Burry's bet isn't crazy. It's a real, defensible read on dilution mechanics. It's also a bet that's been wrong for a while now, and the operating numbers keep making it harder to win.

At some point, institutional investors will come off the sidelines. That could mean upside for the stock’s ceiling, but it could also firm up the stock’s floor. That’s why a better strategy is to hold PLTR through any volatility and take any pullbacks as an opportunity to accumulate.

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