Berkshire Hathaway FY2025 Second Quarter Earnings Comments

Earnings Highlight

Revenue: In Q2 2025, Berkshire's total revenue was $92.515 billion, slightly down from $93.653 billion in the same period last year, falling short of market expectations.

Earnings Per Share (EPS): Net income was $12.37 billion, exceeding market expectations but down 59% from $30.35 billion in Q2 2024. EPS dropped from $14.08 to $5.73. The decline was primarily due to lower investment gains, a $5 billion impairment on Kraft Heinz, and weakness in the insurance business.

Operating Profit: Despite revenue missing expectations, operating profit exceeded forecasts, reaching $11.16 billion, down 3.8% from $11.6 billion in Q2 2024. Core businesses demonstrated resilience.

Segment Performance:

Insurance Business: Underwriting income fell to $2 billion, down 12% year-over-year. Reinsurance Group income dropped from $782 million to $650 million, and Primary Group income fell from $279 million to $63 million, both due to increased losses and tighter business conditions. GEICO performed strongly, with underwriting income rising to $1.82 billion and a combined ratio of 83.5%. After-tax investment income from all reinsurance/insurance businesses increased 1.4% to $3.4 billion, driven by higher short-term investment balances.

BNSF Railway Company: In Q2 2025, BNSF’s pre-tax profit grew 11.5%, operating profit rose 19% to $1.47 billion, and revenue increased 2% to $5.8 billion. Growth was driven by higher freight volumes, improved efficiency, and lower fuel costs, with stable performance offsetting volatility in other segments.

Berkshire Hathaway Energy (BHE): Net income rose 18%, and operating profit increased 7% to $1.1 billion. Renewable energy expansion and strong utility performance highlighted Abel’s focus on stable cash flows, with recession-resistant characteristics providing stability to Berkshire’s overall earnings.

Manufacturing, Service, and Retail (MSR): MSR segment income rose 6.5% to $3.6 billion, with revenue up 4% to $42.3 billion. Growth was driven by resilience in consumer goods, industrial products, and consumer spending, though supply chain disruptions squeezed margins. Subsidiaries like Fruit of the Loom saw revenue declines due to trade policies and tariffs, reflecting challenges from global trade dynamics. Berkshire’s diversified portfolio mitigated impacts, but geopolitical uncertainties require ongoing attention.

Investment Portfolio and Capital Allocation Strategy

Investment Gains and Losses: In Q2 2025, Berkshire’s total investment gains were $6.364 billion, significantly down from $18.75 billion in Q2 2024. Equity securities gains were $7.223 billion, including $7.593 billion in unrealized gains and $370 million in realized losses; fixed-income securities recorded a loss of $859 million. After-tax realized sales gains fell from $47 billion to $4.2 billion. A $5 billion non-temporary impairment on Kraft Heinz, accompanied by relinquishing board seats, reflected a value reassessment. This impairment impacted net income but may free up capital, underscoring the importance of disciplined capital allocation.

Cash Position: As of June 30, 2025, Berkshire’s cash reserves stood at $344.1 billion, slightly down from $347.7 billion at the end of March, near historic highs. The substantial cash provides flexibility, but scarce investment opportunities drag on returns. The slight cash decline reflects minor deployments or cash flow changes. The market anticipates more aggressive capital management from Greg Abel, potentially through acquisitions or buybacks, though no stock repurchasing occurred in Q2 2025.

Future Outlook

Strategic Direction of Successor CEO Greg Abel: Greg Abel will continue to focus on operational efficiency, as evidenced by BNSF’s improved unit volumes and lower operating costs. His capital allocation emphasizes “economic moats,” prioritizing divestitures of non-core assets, selective new investments, and stable cash flows from energy and infrastructure. Abel’s hands-on management may accelerate deployment of the $344.1 billion cash reserve, targeting complementary acquisitions in energy or insurance to counter economic volatility.

Long-Term Value Creation Potential and Competitive Advantage: Berkshire continues to create value with a robust balance sheet, disciplined management, and high-quality assets. Its diversified structure reduces risk, with insurance float serving as a reinvestment engine. Abel inherits Buffett’s patient strategy, waiting for high-quality opportunities in overvalued markets. While this may lag the market in the short term, it ensures economic moats and capitalizes on market dislocations for long-term success.

Market Expectations   

TradingKey - The Q2 2025 earnings report for Berkshire Hathaway is expected to be released on August 2. Below are the market expectations for Berkshire Hathaway’s Q2 2025 revenue and earnings per share (EPS):

· Revenue Expectation: Berkshire Hathaway’s total revenue for Q2 2025 is projected to reach $98.5 billion, a 5.2% increase compared to $93.65 billion in Q2 2024, potentially driven by insurance underwriting profits and investment income.

· EPS Expectation: Berkshire Hathaway’s earnings per share (EPS) for Q2 2025 is expected to be $5.24, a 2.6% decrease from $5.38 in Q2 2024. 

Key Investor Focus Areas

Operating Profit: Operating profit is the best indicator for assessing the health of Berkshire Hathaway’s core businesses. Investors should focus on whether it meets expectations and the performance of different business segments, particularly the insurance and railroad businesses.

Insurance Business Performance: The insurance business is a major revenue source for Berkshire Hathaway. Investors should pay close attention to underwriting profits and investment income. Recent analyses suggest that underwriting profits are expected to remain strong but may be impacted by natural disaster claims.

 Cash Reserves and Capital Allocation: As of Q1 2025, Berkshire Hathaway’s cash reserves reached a record high of $333.3 billion. Investors should monitor how this cash is utilized, including potential large-scale stock buybacks, new acquisition opportunities, or further adjustments to the investment portfolio.

Greg Abel’s Strategic Impact: With Greg Abel set to succeed Warren Buffett as CEO by the end of the year, investors will closely watch his capital allocation strategies and vision for the company’s future, especially amid heightened economic uncertainty. Abel may prioritize stable cash flow investments in energy and infrastructure.

Investment Portfolio Adjustments: Changes in Berkshire Hathaway’s investment portfolio, particularly its holdings in companies like Apple and Bank of America, as well as any new investments, will be another key focus.

Get Started