No. of Recommendations: 45
I was out of commission last week, so this is all probably old news, but here's my summary of the annual report ;-)
Berkshire Hathaway-BRKB reported the company’s net worth during 2025 increased by 10.5%, or an amazing $68 billion, to $717.4 billion with book value equal to about $498,831 per Class A share as of 12/31/25. To put the $68 billion increase in perspective, that is equivalent to the market capitalization of General Motors or Norfolk Southern. Berkshire boasts the largest shareholders’ equity of any U.S. company.
In his first annual letter to Berkshire Hathaway shareholders following his official transition to CEO in January, Greg Abel assured shareholders that Berkshire’s culture and investment philosophy will remain unchanged into “perpetuity”, describing himself as a steward of the legacy created by Warren Buffett and Charlie Munger. Greg Abel described Berkshire’s capital allocation strategy as a disciplined continuation of Buffett’s approach: holding a fortress balance sheet and large cash reserve, concentrating investments in a few high quality, well understood businesses, using opportunistic share repurchases and retaining earnings as long as each dollar can create more than a dollar of long-term value for shareholders. He reiterated that Berkshire’s massive $369 billion cash hoard is “strategic dry powder,” not a signal that the company is retreating from investing, assuring stakeholders that Berkshire will remain an asset, not a risk, to America and the global financial system. He confidentially stated that Berkshire’s foundational values equip management to succeed in the decades ahead.
Net Earnings and Investment Gains
On a GAAP basis, Berkshire reported net earnings of $67 billion during the year, a 25% decline from the prior year. These results included after-tax investment gains of $30.7 billion and $8.7 billion in after-tax impairment charges related to Kraft Heinz and Occidental Petroleum. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings. Berkshire’s five major equity investment holdings, which represent about 65% of total equities held as of year-end, include American Express at $56.1 billion (which charged 25% higher during the year or $11.1 billion); Apple at $62.0 billion (which Buffett pared back by slicing its position by a quarter during the year); Bank of America at $28.5 billion (with Buffett making significant withdrawals of the position during the year); Coca-Cola at $28.0 billion (which popped 12% higher or $3.1 billion during the year) and Chevron at $19.8 billion (which reflects incremental purchases during the year).
In a notable shift in his letter, Greg Abel specifically grouped Apple, American Express, Coca-Cola and Moody's with its market value of $12.6 billion as the "Core Holdings" that Berkshire intends to hold for the long term, notably leaving Bank of America and Chevron off the list of “businesses we understand well, have a high regard for their leaders, and expect will compound over decades.” In addition, Greg added Berkshire’s Japanese trading houses worth $35.4 billion at year-end to the list. Together with the new big four U.S. holdings, these equity positions totaled $194 billion in market value, representing nearly two-thirds of Berkshire’s $297.8 billion equity securities portfolio, providing combined dividends of $2.5 billion and yielding 10% on their original cost basis of $24.5 billion.
Revenues and Operating Earnings
During 2025, Berkshire’s revenues barely budged to $371.4 billion and operating earnings dipped 6% to $44.5 billion primarily due to underperformance in the company’s insurance businesses.
Insurance
During the year, Berkshire’s insurance businesses’ underwriting earnings declined 20% to $7.3 billion after jumping 66% last year. The decline reflects lower earnings from each of Berkshire’s main underwriting groups. While overall underwriting results over the past three years have been exceptional compared to results over longer periods, earnings may decline in the future from the ongoing impacts of competition and rising claim cost trends.
Insurance investment income declined 8.5% during the year to a still whopping $12.5 billion, reflecting lower interest income, attributable to lower interest rates, and dividend income. The float of insurance operations rose 3%, or $5 billion, during the year to end at approximately $176 billion. Thanks to insurance underwriting gains in 2025, albeit at a lower level, the cost of this float was negative.
Railroad (BNSF)
Burlington Northern Santa Fe’s revenues declined slightly during the year to $23.4 billion. Average revenue per car/unit declined 0.5%, primarily due to lower fuel surcharge revenue and unfavorable business mix, partially offset by higher yield. Net earnings chugged ahead by 8.8% to $5.5 billion during the year reflecting lower operating expenses, thanks to improved operating efficiencies, lower litigation accruals, the effect of a charge in 2024 from a labor agreement and a lower effective income tax rate.
Energy (BHE)
Berkshire Hathaway Energy reported flat revenues of $26.3 billion with net earnings charging 7% higher to $4.0 billion, reflecting lower wildfire loss accruals at PacifiCorp, reduced earnings attributable to noncontrolling interests and the impact of real estate brokerage business litigation accruals in 2024, partially offset by lower earnings from the natural gas pipeline and other energy businesses. Greg Abel noted that the regulatory environment remains a "significant challenge" for the energy segment, particularly regarding future investments in renewable infrastructure amidst litigation risks. On the litigation front, cumulative wildfire loss estimates by PacifiCorp were approximately $2.85 billion through December 31, 2025, of which $1.7 billion have been paid. It is reasonably possible that PacifiCorp will incur significant additional losses beyond the amounts currently accrued.
Manufacturing
Berkshire’s Manufacturing businesses reported revenues increased 2% to $78.5 billion for the year with operating earnings up 6% to $12.6 billion.
The Industrial Products segment generated a 4% increase in revenues to $37.3 billion with operating earnings rising 13% to $6.8 billion. Operating results of the group in 2025 generally improved compared to 2024. However, increased costs and reduced availability of certain raw materials could negatively impact earnings in 2026.
The Building Products segment revenues increased 1% to $26.8 billion but operating earnings decreased 4% to $4.0 billion, reflecting slowing customer demand, as well as pricing pressures in the housing market, attributable to prevailing general economic conditions.
The Consumer Products segment revenues declined by 3% to $14.4 billion with operating earnings up 3% to $1.8 billion. Revenue fell primarily due to lower sales volumes at Fruit of the Loom, Jazwares and Duracell, though these losses were partially offset by growth at Brooks Sports, Forest River, and Richline driven by higher volumes, pricing and product mix. Additionally, Duracell boosted 2025 earnings by recording three years of U.S. manufacturing tax credits. Overall, excluding Duracell’s tax credits, the consumer products group’s 2025 pre tax earnings fell significantly, reflecting broad margin and cost pressures partially mitigated by growth at Brooks Sports.
Service and Retailing
Service and Retailing revenues decreased 2% during the year to $135.8 billion with pre-tax earnings dipping slightly to $4.9 billion.
Service group revenues rose 11% to $23.0 billion with pre-tax earnings flying higher by 17% to $2.7 billion, driven by aviation services and TTI, a distributor of electronic components. Aviation earnings grew on higher revenues despite rising operational costs and contract losses, while TTI saw gains from revenue growth and improved expense leverage, partially offset by higher cost of sales.
The Retailing group rang up a 3% increase in revenues to $19.7 billion during the year with pre-tax earnings slipping 4% to $1.3 billion. With the exception of Nebraska Furniture Mart, retailing businesses generated flat or lower earnings in 2025.
Pilot Travel Centers’ revenues traveled 10% lower to $42.2 billion with pre-tax earnings skidding 69% lower to $190 million due to significant volume reductions from bulk fuel sales and fuel trading activities, as well as lower average fuel prices and wholesale fuel volumes. These declines were partially offset by increased retail fuel volumes. Pre-tax earnings compression reflects lower fuel gross margins (especially diesel) and rising operating and depreciation expenses from growth and remodel initiatives.
McLane’s revenues declined 2% to $51.0 billion reflecting one less week in its fiscal year, lower volumes and higher prices attributable to inventory cost inflation, while earnings trucked 7% higher to $676 million reflecting increases in the retail business and declines in the restaurant and beverage businesses.
Financial Position
Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $717.4 billion as of 12/31/25. Excluding railroad, energy and utility investments, Berkshire ended the year with $704.7 billion in investments allocated approximately 42.2% to equities ($297.8 billion), 2.5% to fixed-income investments ($17.8 billion), 52.4% in cash and short-term investments ($369.0 billion) and 2.8% in equity method investments ($20.0 billion), which includes 27.5% ownership of Kraft Heinz and 26.9% ownership of Occidental Petroleum.
While Berkshire holds an extraordinary cash position, Greg Abel noted, “At Berkshire, equity investments are fundamental to our capital allocation activities.” Abel added, “While some of this capital is required to support our insurance operations and protect Berkshire against extreme scenarios, it also constitutes our dry powder. There will undoubtedly be incremental opportunities to deploy our owners’ capital without compromising Berkshire’s resilience. My role is to ensure our liquidity levels and capital deployment remain intentional and deliberate. We will always aim for ownership of productive businesses over U.S. Treasuries.”
Free Cash Flow
During 2025, Berkshire generated $46.0 billion in operating cash flow and invested $20.9 billion in capital expenditures, including capital expenditures of $14.4 billion by BNSF and BHE. BNSF and BHE maintain very large investments in capital assets (property, plant and equipment) and regularly make significant capital expenditures in the normal course of business. BHE and BNSF forecast capital expenditures in 2026 of approximately $15 billion. Free cash flow during the year more than doubled to $25 billion, reflecting investment related items and lower income taxes.
During the year, Berkshire paid $16.9 billion to acquire equity securities, including Chubb and Alphabet, and received proceeds of $30.7 billion from the sale of stocks, including Apple and Bank of America. Berkshire purchased a net $37.4 billion in Treasury Bills and fixed-income investments during the year. On January 2, 2026, Berkshire acquired Occidental’s chemicals business (“OxyChem”) for approximately $9.5 billion.
Share Repurchases
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Greg Abel in consultation with Warren Buffett. There were no repurchases in 2025.
As I stated at the end of the third quarter, given the company’s current valuation and Berkshire’s considerable cash war chest, I would not be surprised to see Berkshire resume share repurchases soon. We did not have long to wait, as Greg Abel recently announced in an interview last week that Berkshire was resuming its share repurchase program.
*****
In a CNBC "Squawk Box" interview on March 5, 2026, Berkshire Hathaway CEO Greg Abel announced the resumption of share buybacks and a significant personal investment to signal "absolute alignment" with shareholders.
Key Interview Highlights
•Share Buybacks Resumed: Berkshire began repurchasing its own Class A and Class B shares on Wednesday, March 4, ending a nearly two-year hiatus since May 2024. Abel noted the decision was made in consultation with Chairman Warren Buffett after determining the stock's conservatively determined intrinsic value exceeded its market price. The repurchase program will thus increase shareholder value.
•Personal $15 Million Investment: Abel used his entire $15.3 million after-tax annual salary for 2026 to purchase 21 Berkshire Class A shares.
He committed to doing this every year he is CEO to maintain alignment with partners and owners. He expects this commitment to result in hundreds of millions of dollars in share purchases over the next twenty years of his career. He currently holds 249 shares now worth about $189 million.
•Continued Relationship with Buffett: Abel confirmed he speaks with Warren Buffett nearly every day to "catch up on what he’s seeing [and] what he’s hearing."
Buffett remains Chairman and continues to go to the office daily to hunt for investments.
•Maintaining Culture & Strategy: Abel reaffirmed that Berkshire's core principles—financial conservatism, high cash reserves (currently $369 billion), and disciplined investing—remain unchanged. He specifically ruled out investing in cryptocurrencies, maintaining the company's long-standing skepticism.
Abel emphasized that while he may be a more “hands-on” executive than Buffett, the decentralized corporate culture remains intact, emphasizing that capital allocation remains centralized while operational decisions stay with individual business leaders.
He reiterated his role as Chief Risk Officer, as he discussed Berkshire’s ongoing wildfire litigation. Greg Abel stated that while Berkshire subsidiary PacifiCorp accepts responsibility for damages where it is at fault, the company will fight litigation regarding wildfires caused by natural events like lightning. Abel emphasized that the utility is not an "insurer of last resort" and will defend against lawsuits where equipment did not initiate the fires, while facing roughly $50 billion in potential liability.
Leadership Transition: Abel described writing his first annual shareholder letter (released Feb 28) as the "toughest" responsibility he has inherited because Buffett is such an "exceptional communicator".
