Michael Burry has publicly questioned whether data analytics giant Palantir Technologies (PLTR +0.22%) deserves to be valued like a high-margin software company. He has pointed to its rising accounts receivable and relatively low deferred revenue -- two factors that make Palantir's financial profile look more like that of a consulting company. He has also highlighted the threat that increasingly capable frontier artificial intelligence (AI) models could weaken Palantir's role with commercial customers.
While these risks are important, Palantir's deferred revenue figure does not capture all of its contracted business. The company had $4.9 billion of remaining performance obligations at the end of June, representing noncancelable contracted revenue that had not yet been recognized.
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Multiple risks
Palantir's accounts receivable rose from nearly $1 billion at the end of December 2025 to around $1.5 billion at the end of June 2026. One customer also accounted for 27% of total receivables at the end of the second quarter. Deferred revenue was about $613 million, or roughly 32% of the company's second-quarter revenue.
These numbers support the premise that has Burry so concerned about Palantir's lofty valuation. From a financial perspective, it does not look like a typical subscription-software company, especially since it also earns revenue from professional services.
However, Palantir generated nearly $2.1 billion in operating cash flow in the first half of 2026, even as higher accounts receivable used about $434 million of cash.
Palantir is not like any normal consulting business
Palantir's economics also look very different from those of a traditional consulting company. In the second quarter, its revenue jumped 93% year over year, while employee count increased only about 5.7%. The company's adjusted gross margin reached 86%, while the adjusted operating margin was 62%. For comparison, consulting firm Accenture's adjusted operating margin was 17% in its fiscal third quarter (which ended May 31).
NASDAQ: PLTR
Key Data Points
Palantir's commercial revenue increased by about $495 million year over year to nearly $945 million in the second quarter. Around 82% of that commercial revenue growth came from existing customers.
At the same time, Palantir's contribution margin rose 10 percentage points year over year to 74% in the quarter. This measures the profits left after cost of revenue and sales and marketing expenses, excluding stock-based compensation.
Palantir's higher contribution margin and its strong revenue growth from existing customers differentiate it from traditional consulting businesses, where top-line growth generally requires proportional increases in employee and delivery costs.
Impressive execution capabilities
Palantir's "forward deployed engineers" are specialists who work closely with customers to build and deploy software to address their real-world problems. The company's ontology layer connects enterprise data, logic, actions, and security policies into a digital representation of client operations. Additionally, its Artificial Intelligence Platform (AIP) can work with models from multiple providers, including customer-hosted models.
Palantir is also expanding its deployment ecosystem through partners. PwC is expanding joint implementation and managed services with the company, while Fujitsu recently became a global forward deployed engineering partner.
It seems that Burry may be underestimating Palantir's business quality. However, with the stock trading at roughly 75.5 times forward expected earnings, it's priced for perfection. Any execution missteps could take a notable toll on the share price. Hence, while the business is strong, the stock may still prove expensive for investors.
