Michael Burry's Big Tech Accounting Analysis: Earnings Quality Concerns and Market Impact

This analysis is based on Michael Burry’s investigation into Big Tech accounting practices, first reported on November 11, 2025 [1]. The renowned investor, known for predicting the 2008 housing crisis, has identified systematic extensions of depreciation schedules across major technology companies including Meta Platforms (META), Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT), and Oracle (ORCL). Burry alleges these changes could inflate reported earnings by approximately $176 billion through 2028, with Meta’s earnings potentially overstated by 20.8% and Oracle’s by 26.9% by 2028 [1][2].

The core of Burry’s analysis focuses on depreciation schedule extensions for computing equipment:

• Alphabet
  : Extended from 3 years (2020) to 6 years (2023-2025) [1]
• Microsoft
  : Extended from 3 years (2020) to 6 years (2022 onward) [1]
• Amazon
  : Extended from 4 years (2020) to 6 years (2024), then to 5 years (2025) [1]
• Meta
  : Extended to 5.5 years in January 2025 [1]
• Oracle
  : Extended from 5 years (through 2023) to 6 years (2024-2025) [1]

Meta explicitly stated that its 2025 depreciation schedule change would reduce depreciation expense by approximately $2.9 billion for the full year [1]. This reduction directly boosts reported operating income and EPS without changing actual cash costs.

The immediate market reaction on November 14, 2025, showed mixed performance:

• Meta (META)
  : Down 0.15% to $608.95 [0]
• Alphabet (GOOGL)
  : Down 0.85% to $276.20 [0]
• Amazon (AMZN)
  : Down 1.09% to $235.00 [0]
• Microsoft (MSFT)
  : Up 1.18% to $509.22 [0]
• Oracle (ORCL)
  : Up 2.65% to $223.34 [0]

The broader market indices showed resilience, with the S&P 500 up 0.88% and NASDAQ up 1.51% on the same day [0], suggesting limited immediate market-wide impact from Burry’s allegations.

The affected companies trade at premium valuations, making earnings quality particularly critical:

• Oracle
  : P/E ratio of 50.72x [0]
• Microsoft
  : P/E ratio of 36.22x [0]
• Amazon
  : P/E ratio of 33.19x [0]
• Meta
  : P/E ratio of 26.96x [0]
• Alphabet
  : P/E ratio of 27.24x [0]

Meta has notably underperformed in 2025, up only 4.2% year-to-date compared to the tech-heavy NASDAQ 100’s 19% gain, and has fallen 17% in the second half of the year [3], potentially reflecting pre-existing concerns about fundamentals and AI investment returns.

A critical insight is that these depreciation schedule changes affect reported earnings but not cash flows. Operating cash flow and free cash flow metrics remain unaffected by depreciation accounting choices, making them potentially more reliable indicators of underlying business performance during this period of massive AI capital expenditure.

Burry’s analysis highlights a potential mismatch between the rapid obsolescence cycle of AI hardware (2-3 year product cycles from companies like Nvidia) and the extended depreciation periods being adopted. This raises questions about whether the accounting treatment reflects the economic reality of AI infrastructure investments.

The muted immediate market response suggests either investor skepticism about Burry’s claims, confidence in the companies’ accounting practices, or a belief that AI investment justification outweighs accounting concerns. However, the high valuations make earnings quality particularly sensitive to investor sentiment shifts.

• Regulatory Scrutiny
  : If Burry’s allegations gain traction, SEC investigations into accounting practices could follow [1]
• Analyst Downgrades
  : Earnings quality concerns could trigger analyst rating cuts and target price reductions
• Investor Confidence
  : Reputational damage could affect investor sentiment, particularly for growth-focused investors

1. November 25, 2025
   : Burry’s promised detailed analysis release date [1]
2. Q4 2025 Earnings
   : Company responses and potential accounting disclosures
3. Depreciation Expense Trends
   : Monitor quarterly depreciation expense growth rates
4. Capex ROI Metrics
   : Track returns on AI infrastructure investments
5. Competitive Accounting Practices
   : Compare with non-tech companies and smaller tech firms

• AI Investment Sustainability
  : The ability of current AI capex levels to generate appropriate returns
• Accounting Standard Changes
  : Potential FASB or IASB rule changes regarding technology asset depreciation
• Market Cycle Position
  : Whether these accounting changes represent earnings management during late-cycle conditions

Michael Burry’s investigation reveals systematic depreciation schedule extensions across major Big Tech companies, potentially inflating earnings by $176 billion through 2028 [1][2]. While immediate market impact has been limited, the concerns warrant careful monitoring given premium valuations and massive AI capital expenditures. Meta explicitly acknowledged that its 2025 depreciation change would reduce expenses by $2.9 billion [1], demonstrating the material impact of these accounting decisions.

The analysis highlights the importance of distinguishing between accounting earnings and cash flow generation, particularly for companies making substantial AI infrastructure investments. Decision-makers should focus on underlying cash flow metrics and capex efficiency while awaiting Burry’s detailed analysis promised for November 25, 2025 [1].

Users should be aware that accounting quality issues may significantly impact reported earnings without affecting underlying cash flows, creating potential valuation dislocations that could correct when market participants shift focus to cash-based metrics.