Generated Title: Did Michael Burry Just Expose a $176 Billion Accounting Trick at Google?
Alright, let's break down this Michael Burry accusation. The guy who made a killing betting against the housing market is now pointing fingers at the hyperscalers, specifically Alphabet (GOOGL), Meta (META), and Oracle (ORCL), alleging they're juicing their earnings by understating depreciation. It's a bold claim, and as usual, the devil's in the details – or in this case, the depreciation schedules.
Burry's tweet alleges a $176 billion understatement of depreciation between 2026 and 2028 across the hyperscalers. He calls out Alphabet specifically, saying they doubled the "network/compute useful life" to six years back in 2020. That's the key: extending the useful life of assets means spreading the depreciation expense over a longer period, making the bottom line look healthier in the short term.
Now, depreciation is a non-cash expense, but it's a real one. It reflects the wear and tear – or, more accurately for tech, the obsolescence – of assets. Understate it, and you're essentially borrowing from future earnings to inflate current ones. It's like stretching out your car payments to make them more manageable, while ignoring the fact that the car is losing value faster than you're paying it off.
The question is, is Burry right? And if so, is it "fraud," as he claims, or just aggressive accounting?
Let's look at Alphabet. Q3 2025 revenues topped $100 billion for the first time. Google search revenues rose 15% year-over-year. Google Cloud revenues jumped 34% YoY to $15.2 billion. These are impressive numbers. But are they too impressive? Are they artificially inflated by fiddling with depreciation?
It's tough to say definitively without access to Alphabet’s internal accounting. But we can look at the trend. The article notes that "profits are no longer witnessing the kind of outsized growth relative to revenue that we saw over the last two years when aggressive cost cuts helped Big Tech companies boost their bottom line." In other words, the easy gains from cost-cutting are gone, and now they're facing the reality of massive capital expenditures on AI infrastructure. (Massive capex that, incidentally, should be depreciated.)
And this is the part I find genuinely puzzling. If Alphabet extended the useful life of its assets back in 2020, why is Burry only raising the alarm now? Are the effects just now becoming material enough to distort the picture? Or is there something else going on?
Another article mentions that Warren Buffett's Berkshire Hathaway initiated a $4.3 billion position in Alphabet last quarter, buying 17.8 million shares. Buffett, the ultimate value investor, has historically shied away from tech, so this is a significant move. Did Buffett's team (likely Todd Combs or Ted Weschler, his investment managers) miss something in their due diligence? Or are they betting that Alphabet's growth story is strong enough to withstand any potential accounting scrutiny? Buffett's Berkshire Reveals $4.3B Alphabet Stake in Final Weeks As CEO
On the other hand, the European Commission is breathing down Alphabet's neck again, launching formal proceedings to assess whether Google is unfairly impacting publishers' websites on Google Search. The E.C. could fine Alphabet up to 10% of its total worldwide turnover – potentially $77.1 billion. So, Alphabet's facing regulatory headwinds in Europe, plus potential accounting issues flagged by Burry. That's a double whammy.
The market, however, seems unfazed. Alphabet's stock continued its upward march, topping a $3.5 trillion market cap. The forward price-to-earnings (P/E) multiple has expanded to 26.7x, which, while not frothy, isn't exactly cheap either. So, the market is pricing in continued growth, despite the potential headwinds.
It's a classic case of competing narratives. On one hand, you have a compelling growth story fueled by AI, cloud, and search dominance. On the other, you have potential accounting shenanigans and regulatory risks. Which narrative will prevail?
Smoke and Mirrors?
Burry's accusation is a serious one, and it deserves scrutiny. But until he releases more details on Nov. 25, it's just that – an accusation. However, the fact that someone with Burry's track record is raising these questions should give investors pause. It's a reminder that even the most successful companies can be vulnerable to accounting tricks and that due diligence is always paramount. Ultimately, it’s up to investors to decide whether they believe Alphabet's numbers add up or if they're just seeing smoke and mirrors.