Berkshire Hathaway’s operating earnings fell by 4% for the quarter versus 2024. Per-share operating income decreased by 4% for the quarter, with no share repurchases over the past year. (Photo by Chip Somodevilla/Getty Images)

Getty Images

Berkshire Hathaway (BRK/A, BRK/B) reported second-quarter earnings of almost $12.4 billion, well below the $30.3 billion in the same quarter of 2024, primarily due to a decline in stocks. Operating earnings, which remove the distortion from market changes and better reflect the firm’s earnings power, fell by 4% for the quarter versus 2024. Per-share operating income decreased by 4% for the quarter, with no share repurchases over the past year. Warren Buffett leads Berkshire as CEO and Chairman with Greg Abel, Vice Chairman of Non-insurance, and Ajit Jain, Vice Chairman of Insurance.

Berkshire announced an impairment to its investment in Kraft Heinz (KHC). The investment had been carried on Berkshire’s books for more than its market value for some time, but some changes in circumstances caused the firm to take a pretax impairment loss of around $5.0 billion. This writedown is a non-cash charge, which reduces the “carrying value of our investment in Kraft Heinz to fair value.” Buffett has long acknowledged that he paid too much for Kraft Heinz, especially in light of the increased competition in the branded food category.

Berkshire’s most significant business by operating earnings is insurance, followed by the manufacturing, service, and retailing segment.

Insurance underwriting was the primary culprit behind the decline in operating earnings. Buffett noted at the annual meeting that Berkshire’s insurance earnings were as good as they get in 2024, so doing less well this year is unsurprising. Other income also declined significantly, primarily due to accounting for foreign currency swings. Excluding insurance and the “other” segment, operating earnings were 13% higher.

Insurance

The two most essential concepts in insurance investing are “float” and underwriting profit. In simple terms, float is created for insurance companies because insurance premiums are paid before any claims are made by the insured. Insurance companies can invest the float, sometimes for years, before insurance losses are reimbursed. Berkshire’s float at $174 billion is $3 billion higher than on December 31, 2024. In general, the value of float increases as yields rise since an insurance company can earn more when investing the cash. Float per share was $120,983, above the level at the end of 2024. Share repurchases were not an aid to the growth of float per share over the past year.

The underwriting profit comparison versus the second quarter of 2024 was challenging, as Berkshire had achieved stellar insurance earnings last year. Notably, policies in force at GEICO grew in the second quarter. Berkshire has a history, unlike many insurance companies, of earning an underwriting profit, meaning that their float costs nothing and makes money in addition to allowing Berkshire to earn a profit from investing the float. Berkshire has three main insurance businesses: GEICO, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group. All three had a profitable underwriting quarter. An underwriting profit means the insurance premium exceeds all insurance claims and expenses. For example, GEICO had a combined ratio of 83.5% in the second quarter, which means that only 83.5 cents of every dollar in insurance premiums were spent on losses and expenses. A combined ratio over 100% indicates the insurance company has an underwriting loss.

For the second quarter of 2025, investment income was 1% higher than in 2024, primarily due to lower taxes. Notably, policies in force grew relative to the first quarter of 2024.

Railroad

Berkshire owns one of the largest railroads in North America, the Burlington Northern Santa Fe (BNSF) railroad, which operates in the US and Canada. Railroad freight volume improved modestly, and operating earnings rose about 19% versus the same quarter last year. On a positive note, BNSF continued to see better productivity, which was the primary reason for the sharp rise in earnings. BNSF’s trailing 12-month operating ratio, operating expenses divided by revenue, improved in the second quarter, which is proof of the productivity improvement. Buffett noted at the annual meeting that the “railroad is not earning what it should,” but is” getting solved,” and the recent progress in reducing operating expenses supports his statement.

Utilities and Energy

BHE generally provides steady and growing earnings, as one would expect from what primarily consists of regulated utilities and pipeline companies. In addition, BHE typically produces significant tax credits due to its renewable electricity generation. For this reason, Berkshire focuses on after-tax earnings, which is “how the energy businesses are managed and evaluated.”

BHE was modestly negative on the headline numbers, with operating earnings falling by 2.6% over the same quarter in 2024. The lack of wildfire loss accruals in the second quarter of 2025 for the US utilities segment flattered the year-over-year comparisons. In the second quarter of 2024, BHE’s US utilities group accrued $251 million for possible wildfire litigation losses. The decrease in earnings from the natural gas pipelines was primarily caused by higher interest expense, decreased margin, and lower other income. The other energy businesses saw a reduction in earnings, primarily from lower profits at Northern Powergrid.

Manufacturing, Service and Retailing

Pretax earnings rose by 4.7%. This segment consists of many diverse companies, so this analysis will focus on the best and worst performers and some themes when looking at this segment.

Within the industrial segment, Marmon, “which consists of more than 100 autonomous manufacturing and service businesses, internally aggregated into twelve groups, and includes equipment leasing for the rail, intermodal tank container and mobile crane industries,” saw a 6.9% increase in pretax earnings. The improvement was primarily due to “reductions of liabilities accrued in connection with a prior business acquisition,” with operating results in the twelve groups mixed.

Elsewhere in the manufacturing segment, the building and consumer products groups accounted for the decline in pretax income. Within building products, Clayton Homes had better revenues, but lower pretax income due to “lower earnings from financial services.” Berkshire noted that their “building products businesses are experiencing slowing customer demand and pricing pressures, attributable to prevailing general economic conditions and housing markets. The decline in consumer products earnings was primarily from Forest River, Garan, Jazwares, and Duracell. Brooks Sports and Fruit of the Loom had better earnings.

The service group saw a 15.2% increase in pretax earnings for the quarter, primarily attributable to the aviation services, TTI, leasing businesses, and Charter Brokerage.

The retailing group saw a turnaround in earnings growth, with a 11.9% increase in pretax earnings for the quarter. The most critical portion of the retailing segment is Berkshire Hathaway Automotive (BHA), which owns over 80 auto dealerships. BHA had 8% higher earnings compared to the second quarter of 2024. Pretax profits for the remainder of the retailing group rose by 23.9%, due primarily to “higher earnings from Nebraska Furniture Mart and seasonality effects at See’s Candies.”

Pilot Travel Centers (PTC) is the largest operator of travel centers in North America, under the names Pilot and Flying J. On January 16, 2024, Berkshire acquired the final 20% and now owns 100% of the entity. PTC’s pretax earnings decreased 40.2% due to “lower gross sales margins and higher selling, general and administrative expenses.” McLane’s pretax earnings were 23.9% higher thanks to “an increase in the overall gross sales margin rate, partially offset by higher selling, general and administrative expenses.”

Non-Controlled Businesses & Other

This segment includes companies’ profits that must be accounted for under the equity method due to the size of ownership and influence on management. The after-tax equity method earnings have Berkshire’s proportionate share of profits attributable to its investments in Kraft Heinz (KHC), Occidental Petroleum (OXY), and Berkadia. Berkshire is Occidental Petroleum’s largest shareholder, with a 28.1% stake. More about the reasons for the Occidental investment is here.

The segment experienced a 97% decline in operating earnings for the quarter, primarily due to foreign currency exchange rate losses generated from bonds issued by Berkshire Hathaway and denominated in British Pounds, euros, and Japanese Yen. These foreign currency swings are not a concern as Berkshire has significant assets and earnings denominated in these foreign currencies. Investment gains from non-U.S. dollar investments generally offset some of these losses and vice versa, depending on currency exchange rates. Acquisition accounting expenses are also reflected in this segment. These expenses are created by amortizing intangible assets connected to companies purchased by Berkshire. Finally, the gain in other earnings includes “Berkshire parent company investment income, corporate expenses, intercompany interest income on loans to operating subsidiaries when the related interest expense is included in earnings of the operating subsidiaries and unallocated income taxes.”

Investment Portfolio

Berkshire’s insurance company investment portfolio is currently 52% publicly traded stocks, with 44% in cash.

Berkshire was a net seller of $3 billion in publicly traded stocks in the first quarter, the eleventh straight quarter of Berkshire Hathaway’s net sales of stocks. Berkshire bought $3.9 billion of stocks while selling $6.9 billion. The upcoming 13F filing on August 14 with the SEC will provide more specific buy and sell details, but some clues within the current filing point to more sales of Bank of America (BAC) and Apple (AAPL).

Summary And Scorecard

Berkshire’s stock price outperformed the S&P 500 in the first quarter, falling by 8.8% versus a total return of +10.9% from the S&P 500. Year-to-date through August 1, Berkshire’s price was +4.3%, while the S&P 500 had a total return of +6.9%.

Short-term results are generally not meaningful for Berkshire since it is managed with a focus on increasing long-term value and not meeting quarterly hurdles. This ability to take advantage of time arbitrage has served the company and shareholders well over the years. The goal in looking at the results is to see if the segments are generally operating as expected and to consider Warren Buffett’s capital allocation decisions.

Previously, Buffett provided a handy blueprint for the goals of Berkshire’s management. The first goal would be to “increase operating earnings.” Secondly, success in the “decrease shares outstanding” goal would boost operating earnings per share faster. Lastly, “hope for an occasional big opportunity,” allowing for a sizable cash investment at an attractive expected return. This analysis will use Buffett’s blueprint as a lens through which to evaluate how Berkshire is performing.

Increase operating earnings: Trailing 12-month operating earnings were 8.0% higher than last year’s same quarter. Buffett says that operating earnings are the “most descriptive” way to view Berkshire since they remove the short-term volatility of market fluctuations in net earnings.

Decrease shares outstanding: Particularly since 2018, a significant capital allocation decision has been made to increase share repurchases. When Berkshire Hathaway actively repurchases shares, it signals when Buffett believes its share price is below his intrinsic value estimate. If he is correct, the purchases are a value-creator for the remaining shareholders. Berkshire has stated that there would be no stock repurchases if it would cause cash levels to fall below $30 billion, so the firm’s safety will not be compromised. Berkshire has not repurchased stock for the last five quarters.

Until an announcement in mid-2018, Berkshire had only made repurchases when the stock traded at less than 1.2 times the price-to-book (P/B) ratio. While that constraint is now relaxed, it is still a good indicator of the general range when aggressive repurchases will likely be seen. Berkshire’s price-to-book ratio remained elevated during the quarter, so share repurchases were suspended. Berkshire only intends to repurchase shares when the “repurchase price is below Berkshire’s intrinsic value, conservatively determined.” The price-to-book ratio remains a reasonable proxy for gauging Berkshire’s intrinsic value. The stock repurchases in the first quarter of 2024 were likely done at around 1.4-1.5 times book value. Berkshire’s stock reached almost 1.8 times book in May 2025, so a lack of repurchases in the quarter wasn’t unexpected. With the recent decline in the shares, the valuation is nearing a level where repurchases might restart. Still, Warren Buffett’s judgment about its intrinsic value versus other available uses of capital can differ from the simple price-to-book measure.

A longer-term view of the positive impact of Berkshire’s share repurchases is illuminating. Since the start of more aggressive share repurchases in 2018, Berkshire’s operating earnings have grown at a 16.5% compound growth rate, while operating earnings per share have done 2.1 percentage points better at 18.6%. Eagle-eyed readers might notice that operating earnings growth oddly exceeded operating earnings per share growth over the last year. Berkshire issued some shares to purchase the remainder of Berkshire Hathaway Energy (BHE) in October 2024.

Hope for an occasional big opportunity: Berkshire has a fortress balance sheet with cash and equivalents of over $339 billion. Cash as a percentage of Berkshire Hathaway’s size is close to the highest on record, at 29.6%. This cash hoard provides flexibility to take advantage of opportunities, including repurchasing its stock if the price declines to attractive levels.

Share repurchases had been off the table at the elevated valuations, but an additional lever for Buffett to create value might soon return. Shareholders should take comfort in knowing that the firm is well-positioned to withstand and emerge stronger from any tariff shocks, recession, or market downturn, thanks to its financial resilience, which enables it to capitalize on opportunities during a crisis.

Buffett announced at the end of the annual meeting in May that he planned to step down from the CEO role at the end of the year. Greg Abel will assume the CEO role and have the “final word on operations or capital deployment.” Notably, Buffett will remain Chairman to provide any needed guidance and intends to retain all his shares in the company.

Some are attributing the relative weakness in Berkshire’s share price to Buffett’s announcement of leaving the CEO role, but the proximate cause likely lies elsewhere. Investors flocked to Berkshire stock as a haven when the odds of recession soared with the tariff threat. As the fear of recession receded, some investors re-allocated to other stocks, and Berkshire’s valuation had become stretched in May.

While Berkshire’s quarterly operating earnings were down modestly year-over-year, there were some pleasant surprises in the data. Excluding insurance and the other segment, which is heavily impacted by foreign exchange volatility, operating profits grew 13% year-over-year. The BNSF railroad made significant progress in improving productivity to drive higher profits. The manufacturing, service, and retailing segment was surprisingly resilient with 12% year-over-year operating earnings growth. Lastly, one of Berkshire’s crown jewels, GEICO, seems to be back in profitable growth mode with policies in force continuing to rise.