A Changing of the Guard: Berkshire Hathaway’s Q4 Earnings Reflect a New Era
The final quarter of Warren Buffett’s illustrious tenure as CEO of Berkshire Hathaway concluded with a notable dip in operating earnings, setting the stage for Greg Abel’s leadership. As the conglomerate navigates this significant transition, its Q4 performance, particularly in the crucial insurance sector, has drawn keen attention from investors and analysts alike.
Operating Earnings Decline as Buffett Hands Over the Reins
Berkshire Hathaway reported operating earnings of $10.2 billion for the fourth quarter, a substantial decrease of over 29% from the $14.56 billion recorded in the same period a year prior. This decline marks a pivotal moment, as it represents the last quarter under the direct stewardship of legendary investor Warren Buffett, who announced his decision to step down at last May’s annual shareholders meeting. Greg Abel officially assumed the CEO role at the start of 2026, promising in his inaugural annual letter to uphold the bedrock principles of financial strength and capital discipline that have defined Berkshire’s culture.
Insurance Sector Faces Headwinds
A primary driver behind the Q4 earnings contraction was weakness within Berkshire’s expansive insurance operations. Underwriting profits saw a sharp 54% reduction, falling to $1.56 billion from $3.41 billion in the previous year. Concurrently, insurance investment income also experienced a significant slide, dropping nearly 25% from $4.088 billion to $3.1 billion.
Full-Year Performance and Investment Volatility
For the entirety of 2025, Berkshire Hathaway’s operating earnings totaled $44.49 billion, down from $47.44 billion in the preceding year. The insurance segment’s full-year performance mirrored the quarterly trend, with underwriting profits at $7.26 billion (down from $9 billion in 2024) and investment income easing to $12.5 billion from $13.6 billion.
Overall earnings, which encompass gains and losses from the conglomerate’s vast stock market investments, saw a slight dip in Q4 to $19.2 billion from $19.7 billion. However, these figures were significantly impacted by a $4.5 billion impairment related to Berkshire’s holdings in Kraft Heinz and Occidental Petroleum. Investment gains for the quarter stood at $13.5 billion.
It is crucial to note that for the full year, overall earnings fell more sharply to $66.97 billion from $89 billion. Consistent with Buffett’s long-held philosophy, Berkshire Hathaway routinely advises investors to disregard short-term fluctuations in its investment portfolio. The company reiterated this stance in its earnings release, stating, “The amount of investment gains (losses) in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”
Capital Discipline and a Robust Cash Position
Despite the quarterly earnings dip, Berkshire’s financial strength remains formidable. Buffett opted against share buybacks in Q4, even as the stock ended the period relatively flat. While the conglomerate’s cash hoard did slightly recede from a record $381.6 billion in Q3 to $373.3 billion, it still represents an immense war chest for future opportunities.
The Enduring Legacy of Long-Term Value Creation
In 2025, Berkshire Hathaway Class A shares advanced 10%, trailing the S&P 500’s 16.4% gain. However, this short-term comparison pales in comparison to the unparalleled wealth creation achieved under Buffett’s leadership over decades. Since 1965, Berkshire Hathaway has delivered compounded annual gains of 19.7%, nearly double the S&P 500’s compounded increases over the same period. Greg Abel, in his first annual letter, highlighted the staggering overall gains for Berkshire, exceeding 6,000,000% over that timeframe, compared to the S&P 500’s 46,061% (including dividends). This remarkable track record underscores the enduring value of Buffett’s investment philosophy and the robust foundation upon which Abel now builds.
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