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Berkshire Hathaway Q4 2025: Buffett’s Finale, Abel’s Debut

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Berkshire Hathaway (BRK/A, BRK/B) reported fourth-quarter earnings of almost $19.2 billion, below the $19.7 billion in the same quarter of 2024, due to lower operating profits and an impairment of Berkshire’s Occidental Petroleum investment but partially offset by a larger gain in stocks. Operating earnings, which remove the distortion from market changes and better reflect the firm’s earnings power, fell by 30% for the quarter versus 2024. Per-share operating income decreased by 30% for the quarter, with no share repurchases over the past year. This was the last quarter under Warren Buffett’s tenure as CEO and Chairman. At the beginning of this year, Greg Abel took over as CEO, while Buffett retained the title of Chairman. Ajit Jain remains as Vice Chairman of Insurance Operations.

For 2025, headline earnings fell by 25%. Without the non-cash impairment charges for Kraft Heinz and Occidental, earnings would have fallen by 15.5% due to lower investment gains and, to a lesser extent, lower operating earnings. Most importantly, 2025 operating earnings and operating earnings per share fell by a more modest 6% from 2024 levels.

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

The segment was the primary driver behind the decline in operating earnings for the quarter and 2025. Buffett noted at the annual meeting that Berkshire’s insurance earnings were as good as they get in 2024, so this pullback should not come as a surprise. For 2025, Non-control businesses and other income rose significantly, primarily due to accounting for foreign currency (FX) swings on Berkshire’s non-dollar borrowing, goodwill impairments, and a decline in equity method earnings. Excluding the FX impact on the “other” segment, operating earnings were 3% lower than in 2024. If insurance and FX are excluded, the non-insurance businesses grew operating earnings by 7% in 2025.

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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 reimbursing insurance losses. Berkshire’s float is $5 billion higher than on December 31, 2024, at $176 billion. 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 $122,373, above the $118,897 level at the end of 2024. Share repurchases did not aid per-share float growth over the past year.

Significantly, policies in force at GEICO grew in 2025. Unlike many insurance companies, Berkshire has a history of earning underwriting profits, meaning its float costs nothing and generates income, allowing it to profit from investing it. Berkshire has three main insurance businesses: GEICO, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group. All three had a profitable underwriting year. Underwriting profit is the positive difference between the insurance premium and all insurance claims and expenses. For example, GEICO had a combined ratio of 84.7% in 2025, meaning that 84.7 cents of every dollar of insurance premiums was spent on losses and expenses. A combined ratio above 100% indicates an underwriting loss for an insurance company.

For 2025, investment income was 8% below 2024, primarily due to lower short-term interest rates and capital distributions from Berkshire’s insurance subsidiary at the end of 2024.

In discussing the insurance business, Abel noted that “Their performance reflected both their inherent strengths and an industry that, after several years of needed adjustments to pricing and policy terms, in 2025 began to experience a deceleration or reversal of these trends, particularly in the latter half of the year. This likely means we will write less property and casualty business for a period of time.” While GEICO has made strides in returning to growth and better profitability, Abel says, “The GEICO team remains focused on pricing risks correctly for both existing and new customers. Restoring retention while maintaining underwriting discipline will take time.” Lastly, Abel expects headwinds in reinsurance, as industry claims are growing faster than pricing, so Berkshire will likely do less business in this area.

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 9% versus last year. On a positive note, BNSF continued to see improved productivity, which was the primary driver of this year’s earnings improvement. BNSF’s trailing 12-month operating ratio —operating expenses divided by revenue —continued to improve in the fourth quarter, demonstrating productivity gains.

Abel noted the railroad’s productivity improvement in 2025 but said more progress is needed. He said, “The gap to the industry’s best remains too wide and closing it will require continued improvements in efficiency and service.”

Utilities and Energy

BHE should generally provide steady, growing earnings, as it primarily consists of regulated utilities and pipeline companies. In addition, BHE typically generates significant tax credits from its renewable energy generation. For this reason, Berkshire focuses on after-tax earnings, which is “how the energy businesses are managed and evaluated.”

BHE was negative on the headline numbers, with after-tax operating earnings falling 1.1% year over year for 2025. For the US utilities segment, Pacificorp’s wildfire loss accruals were $100 million in 2025 and $346 million in 2024. Earnings at the natural gas pipelines were lower due to higher expenses and lower margins, but gas transportation and storage revenues were higher. Lower earnings in the other energy businesses were primarily due to Northern Powergrid, as inflation adjustments were lower and interest expenses higher. Real estate returned to profitability after losses in 2024 from litigation.

Regarding the Berkshire’s liabilities stemming from Pacificorp’s partial responsibility for the wildfires, Abel noted that “PacifiCorp is not an insurer of last resort and should not be treated as a deep pocket.” In discussing the future for the segment, Abel said: “Our willingness to invest capital depends on the continued functioning of the regulatory compact through which utilities earn a reasonable return on invested capital. Near-term opportunities are significant, and BHE will pursue them selectively.”

Manufacturing, Service and Retailing (MSR)

Pretax earnings grew by 3.8% versus last year. This segment comprises many diverse companies, so this analysis will focus on the best and worst performers and the themes within it.

On the negative side, Lubrizol saw pretax earnings decline by 20.6% in 2025. The decline was a function of lower prices and volumes and higher costs. The CEO of Lubrizol, Rebecca Liebert, will also be responsible for OxyChem, which was acquired from Occidental Petroleum (OXY) in 2025, though the transaction closed in early 2026.

On a more positive note, Precision Castparts, which provides aerospace parts, has fully rebounded from its woes around the pandemic when air travel ground to a halt. Abel noted that “Precision Castparts generated $2.4 billion of net cash flows from operating activities, compared to an average of $0.9 billion in 2021 and 2022 and $1.7 billion in 2015, the last full fiscal year before our acquisition.”

Not unexpected given the housing market dynamics, the building products segment saw earnings decline. Abel highlighted Shaw’s struggles as consumers moved away from Shaw’s specialty, carpeting. Though management pivoted to focus on hard-surface solutions, the delivered product and service had issues. Shaw is in the midst of improving quality and working to win back consumers.

Unfortunately, the improvement in consumer sector earnings was due to the recognition of US tax credits for Duracell rather than a fundamental business improvement. The decline in consumer products earnings was primarily due to Forest River, Garan, Jazwares, and Duracell, while Brooks Sports posted better earnings.

The service group saw a 17.2% increase in pretax earnings for the year, primarily attributable to aviation services (NetJets and FlightSafety) and TTI, an electronic component distributor.

The retailing group reported lower pretax earnings, down 4.2% for the year. The most critical portion of the retailing segment is Berkshire Hathaway Automotive (BHA), which owns over 80 auto dealerships. BHA reported 0.6% lower earnings than in 2024. Pretax profits for the remainder of the retailing group declined by $53 million, due primarily to “sluggish customer demand in 2025, attributable to a combination of increased competition and the impacts of higher economic uncertainty and changes in consumer confidence.”

Pilot Travel Centers (PTC) is the largest operator of travel centers in North America under the Pilot and Flying J brands. On January 16, 2024, Berkshire acquired the final 20% and now owns 100% of the entity. PTC’s pretax earnings decreased 69.1% due to lower revenues combined with lower margins and higher expenses. Abel implied that the business was mismanaged during the acquisition period, while Berkshire had no say in the management. Pilot has been investing in modernization since 2023 to improve the customer experience, but there is more work to be done.

McLane’s pretax earnings were 6.6% higher thanks to “earnings increasing in the retail business and declining in the restaurant and beverage businesses.”

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 26.9% stake. More about the reasons for the Occidental investment is here.

The interest income improved due to “increased investments in U.S. Treasury Bills, which derived largely from capital distributions from Berkshire subsidiaries.” The foreign currency exchange rate losses were 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.

The goodwill impairment losses in 2025 related to “certain building products, consumer products and retailing businesses.” Equity method earnings were lower due to lower earnings at Occidental Petroleum (OXY) and Kraft Heinz (KHC).

Acquisition accounting expenses are also reflected in this segment. These expenses result from the amortization of intangible assets associated with companies acquired by Berkshire. Finally, the loss in other earnings includes “unallocated general and administrative expenses, interest expense, income tax expense and interest income on certain intercompany loans.”

Investment Portfolio

Berkshire’s insurance company investment portfolio is currently 56% publicly traded stocks, with 40% in cash.

Berkshire was a net seller of $3.1 billion in publicly traded stocks in the fourth quarter, the thirteenth straight quarter of Berkshire Hathaway’s net sales of stocks. Berkshire bought $3.5 billion of stocks while selling $6.6 billion. The recent 13F filing detailed all the specific changes in US stock positions.

Abel directly handled the thought that this large cash pile is a purposeful avoidance of buying stocks. Rather, he notes that Berkshire is just not seeing enough opportunities that meet its stringent criteria. To quote Abel directly: “Many times in Berkshire’s history, some observers have suggested that our substantial cash position signals a retreat from investing. It does not. We continue to evaluate many opportunities and will remain patient and disciplined in pursuing the right ones for the benefit of our owners.”

Summary And Scorecard

Berkshire’s stock price underperformed the S&P 500 in the fourth quarter, rising by 0.1% versus a total return of +2.7% from the S&P 500. In 2025, Berkshire’s price rose by 10.9%, while the S&P 500 posted a total return of 17.9%.

Short-term results are generally not meaningful for Berkshire, which is managed with a focus on increasing long-term value rather than meeting quarterly hurdles. This ability to exploit time arbitrage has served the company and its shareholders well over the years. The goal of the review is to assess whether the segments are generally operating as expected and to consider Warren Buffett’s capital allocation decisions. At the beginning of 2026, Greg Abel became responsible for all capital allocation decisions.

Previously, Buffett provided a handy blueprint for Berkshire’s management goals. 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, even when Greg Abel is at the helm.

Increase operating earnings: Trailing 12-month operating earnings were a disappointing 23.6% lower than last year. Buffett says that operating earnings are the “most descriptive” way to view Berkshire, as they remove the short-term volatility of market fluctuations from net earnings.

This decline differs from the 6% shown earlier, because the value impairment of Kraft Heinz and Occidental was included in this calculation. Regarding Kraft Heinz, Abel said, “Our investment in Kraft Heinz has been disappointing. Even after considering the preferred equity component in our original Heinz investment, our return has been well short of adequate.” Berkshire’s filing stated: “While we currently have no intention of disposing of any Occidental common stock, in our judgment, the unrealized loss was other than temporary.” The decline in operating earnings from the impairment is paying for past errors, so it should be considered part of the long-term value-creation measurement, but not necessarily a black mark on this quarter. It could be considered as Buffett wanting Abel to start with a clean slate.

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 it would not repurchase stock if doing so would cause cash levels to fall below $30 billion, thereby ensuring the firm’s safety. Berkshire has not repurchased stock for the last six quarters.

Until an announcement in mid-2018, Berkshire had repurchased stock only when the stock traded at less than 1.2 times the price-to-book (P/B) ratio. While that constraint is now relaxed, it remains a good indicator of the general range of when aggressive repurchases are likely to occur. 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 and second quarters of 2024 were likely made at around 1.4 to 1.5 times book value. Berkshire’s stock traded between 1.5 and 1.8 times book in 2025, so it flirted with a level where some repurchases could have been seen, but never got there. With the stock’s recent sideways performance, the valuation at a little over 1.5 times is nearing a level where repurchases might resume. Still, Greg Abel’s judgment about its intrinsic value relative to other uses of capital can differ from the simple price-to-book ratio.

Speaking of Abel, he clearly stated that share repurchases remain part of his value-creating toolbox. To quote, “We will buy back Berkshire shares when they trade below our estimate of intrinsic value, conservatively determined, ensuring that repurchases enhance per-share value for continuing owners. We may also purchase large blocks of shares directly from major holders when the opportunity presents itself. These purchases allow shareholders to own an incrementally larger piece of Berkshire’s businesses, without deploying any additional capital of their own.”

Abel noted in his annual letter that Berkshire would not pay a dividend until the board judged that shareholders would be better off if it were paid out. He did not paint himself into a corner, since he noted that this policy would be reviewed annually.

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 12.2% compound growth rate, while operating earnings per share have done 1.9 percentage points better at 14.1%. Notably, Berkshire issued shares to purchase the remaining stake in Berkshire Hathaway Energy (BHE) in October 2024

Hope for an occasional big opportunity: Berkshire has a fortress balance sheet with cash and equivalents of $373.3 billion. Cash as a percentage of Berkshire Hathaway’s size is close to the highest on record, at 30.5%. Though this analysis quotes the cash levels listed on the balance sheet at the end of the quarter, accounts payable for the purchase of Treasury Bills and the BNSF cash needed for operations should be subtracted, so the total cash is slightly lower at $369.0 billion. In any case, the narrative remains unchanged. This cash hoard provides flexibility to take advantage of opportunities, including repurchasing its stock if the price declines to attractive levels.

There were no huge opportunities seized in 2025, but Berkshire inked a relatively small acquisition of OxyChem from Occidental Petroleum (OXY) for $9.7 billion. Abel noted that Berkshire also purchased Bell Laboratories, which provides rodent control, for an undisclosed amount.

Summary Conclusions

Warren Buffett ended his reign as CEO with a mediocre earnings report, but Berkshire retains significant earnings and cash flow generation power. Buffett’s accomplishments over his 60 years cannot be overstated. He took a failing textile mill and turned it into the ninth-largest company in the S&P 500, while the stock’s total return almost doubled the S&P 500’s. His long-term track record is unmatched.

Berkshire’s 2025 annual operating earnings slipped by 6% year-over-year, excluding the impairment charges from Kraft Heinz and Occidental Petroleum. The insurance business was the main driver of earnings weakness; operating earnings excluding insurance would have been flat with 2024.

Berkshire does not provide earnings guidance, but headwinds in the insurance business will likely lead to modest operating earnings growth in 2026. Insurance industry dynamics and loss ratios will make growth in that segment challenging. Further, as short-term interest rates decline, the interest income on Berkshire’s cash pile falls. Crucially, the insurance underwriting demonstrates Berkshire’s strength in risk management, as policies will not be underwritten without sufficient compensation. It is another example of the Berkshire principle of focusing on long-term value creation over short-term results.

Abel’s first annual letter as CEO provided confidence that he would leverage his own strengths while adhering to Berkshire’s timeless principles rather than trying to copy Warren Buffett’s style. He implicitly acknowledged that Berkshire’s size makes it impossible to recreate Buffett’s return track record, but the company should provide exceptional downside risk and a reasonable long-term return by growing Berkshire’s intrinsic value. Abel stated that Berkshire is “fully equipped to transition from founder-led to one well-positioned for the next 60 years and beyond.” While Abel was clear that Berkshire’s decentralized model was a competitive advantage, he also focused on operational excellence. Warren Buffett and Charlie Munger spent most of their time on capital allocation, so Abel’s strength in operations should add long-term value. He outlined several businesses with room for improvement and provided clear goals.

Share repurchases had been off the table at the elevated valuations, but an additional lever for Abel to create value might soon return. Abel explicitly noted the opportunity for future share repurchases when he said, “We will effectively and efficiently return capital to our owners through share repurchases when the value proposition is compelling.” Shareholders should take comfort in knowing that the firm is well-positioned to withstand and emerge stronger from any tariff shocks, geopolitical risks, recession, or market downturn, thanks to its financial resilience, which enables it to capitalize on opportunities during a crisis.

Abel confirmed indirectly that Buffett won’t take questions at the annual meeting in May. This year, the meeting will include a CEO update from Greg Abel and two question-and-answer sessions. The first session will be with Abel and Ajit Jain and will focus on the insurance operations. The second session will focus on non-insurance operations with Abel, Katie Farmer from BNSF, Adam Johnson from NetJets, and the president of consumer products, service, and retailing. While Warren Buffett’s absence from the stage is a loss, shareholders are likely to learn more about the details of the status, opportunities, challenges, and risks of Berkshire’s many businesses. As a shareholder and analyst, this will be the positive side to this evolution.