At a Glance
- Berkshire Hathaway reported a significant 34% year-over-year increase in third-quarter operating earnings, reaching $13.485 billion.
- The company’s cash reserves hit an all-time high of $381.6 billion, driven by a surge in insurance underwriting income.
- Despite the strong financial performance and ample cash, Warren Buffett opted against stock repurchases in the first nine months of 2025, instead net selling equities.
- Analysts are expressing concerns over Berkshire’s future performance and succession plan, with some downgrading the stock following CEO Warren Buffett’s announced departure.
- Berkshire Hathaway did make a major acquisition, agreeing to purchase Occidental Petroleum’s petrochemical unit, OxyChem, for $9.7 billion.
Berkshire Hathaway’s Strong Q3 Earnings Amidst Record Cash Holdings
Berkshire Hathaway has announced a substantial 34% surge in its third-quarter operating earnings, achieving a total of $13.485 billion. Concurrently, the company’s cash reserves have swelled to an unprecedented all-time high of $381.6 billion. This impressive financial performance was largely fueled by a remarkable increase of over 200% in insurance underwriting income, which alone contributed $2.37 billion to the earnings.
Despite this significant accumulation of capital, CEO Warren Buffett has maintained a cautious stance regarding share repurchases. In the first nine months of 2025, Berkshire Hathaway did not buy back any of its own stock, even with the company’s share price experiencing a decline.
Investors had anticipated a return of capital through buybacks, but the company’s report offered no such indication, leading to disappointment among shareholders.
📊 While Berkshire’s Class A and B shares have seen a 5% increase year-to-date, this growth lags behind the S&P 500’s impressive 16.3% rise. In the third quarter, Berkshire Hathaway engaged in net selling of equities, realizing $10.4 billion in taxable gains rather than deploying capital into new stock purchases.
This strategic decision signals Warren Buffett’s assessment that current market valuations do not present compelling investment opportunities. This level of caution, especially with Berkshire’s vast cash reserves – exceeding the GDP of several nations – is drawing considerable attention and scrutiny.
Buffett’s Succession and Market Reaction
Warren Buffett, nearing his 96th birthday, has declared his intention to step down as CEO at the close of 2025, concluding a storied career spanning over six decades. While he will retain his position as Chairman, Greg Abel, the current vice chair overseeing non-insurance operations, is slated to assume the CEO role. Abel will also take over the responsibility of composing the company’s shareholder letters beginning in 2026.
The announcement of this leadership transition has coincided with a notable dip in Berkshire Hathaway’s stock price. Prior to Buffett’s May announcement at the annual meeting, Berkshire’s Class B shares had reached a record high, closing just below $540. At that juncture, the stock had outperformed the S&P 500 by a significant 22.4 percentage points.
Following the news of the CEO change, the Class B shares experienced an 11.5% decline. Although the stock has recovered slightly from its August lows, where it was down nearly 15%, it remains considerably below its September 4 closing high of $507.
The performance gap relative to the S&P 500 has slightly narrowed, stood at 10.9 percentage points as of the week’s end, down from a wider 12.2-point difference earlier in the week, marking the most substantial disparity observed this year.
Wall Street analysts have responded to these developments with concern. On October 26, analysts Meyer Shields and Jing Li from Keefe, Bruyette & Woods downgraded Berkshire’s Class A shares to “underperform” and reduced their price target from $740,000 to $700,000. The stock closed that week at $715,740.
Their report, titled Many Things Moving in the Wrong Direction, highlighted a series of potential headwinds. These include the anticipated peak of GEICO’s underwriting margins, declining prices in the catastrophe reinsurance market, lower short-term interest rates, challenges related to railroads and tariffs, and the potential loss of tax credits for alternative energy projects. The analysts predict these factors will collectively suppress performance over the coming year, attributing Berkshire’s lagging stock performance primarily to Buffett’s impending departure.
Succession Uncertainty and Investor Confidence
Investors have voiced apprehension regarding what they perceive as Berkshire’s unique succession risk. The company deviates from conventional corporate norms by not issuing forecasts and by abstaining from analyst calls. This approach was generally accepted during Warren Buffett’s tenure, largely due to his unparalleled reputation.
Shields and Li noted that Buffett’s likely unrivaled reputation and what we see as unfortunately inadequate disclosure” could deter investors once he is no longer actively managing the company day-to-day. Furthermore, the diminishing Buffett premium, an additional valuation attributed to the company solely because of Buffett’s leadership, is becoming more apparent.
The Wall Street Journal captured this sentiment, quoting Shields: “There are people that have developed enormous confidence in Warren Buffett. For them, that’s where the investment thesis starts and stops.”
However, not all market observers share this cautious outlook. Chris Bloomstran, president of Semper Augustus Investments Group, argues that Berkshire Hathaway was already overvalued before the May meeting. He points out that the stock has still appreciated by over 5% in 2025, while Progressive, a key competitor to GEICO, has seen a 14% decrease in its stock value.
Bloomstran has been actively buying Berkshire shares and believes Buffett’s departure is not the sole driver of the recent stock performance. He stated, “Everybody I know inside the Berkshire world has nothing but rave reviews and good things to say about Greg.”
Similarly, Henry Asher from Northstar Group believes that Greg Abel does not need to replicate Buffett’s investment track record for Berkshire to continue generating substantial profits. Asher commented, “You’re not going to cancel your shipment on the Burlington Northern because Buffett isn’t there. The businesses will continue to produce mammoth amounts of cash flow, with or without Buffett.”
OxyChem Acquisition and Continued Cash Growth
While Berkshire Hathaway abstained from stock buybacks and broad equity investments throughout much of 2025, it did execute one significant acquisition. In October, the company agreed to acquire Occidental Petroleum’s petrochemical division, OxyChem, for $9.7 billion in cash. This transaction marks Berkshire’s largest acquisition since its $11.6 billion purchase of Alleghany in 2022.
This major deal does not alter the broader narrative of Buffett’s continued market_reserve strategy for most of 2025, which led to a record accumulation of cash.
In addition to the $13.485 billion in operating earnings, Berkshire’s total third-quarter earnings, which include gains from its public stock holdings, rose by 17% to reach $30.8 billion. These figures reflect substantial overall gains for the year, even as the stock price has lagged and analysts express concerns about future performance.
Expert Summary
Berkshire Hathaway’s third quarter demonstrated robust operating earnings and record cash reserves, yet the company, under Warren Buffett’s leadership, avoided stock buybacks. The impending CEO transition to Greg Abel has introduced investor uncertainty and a notable stock underperformance compared to the broader market, although some experts maintain confidence in Berkshire’s underlying business strengths and future cash flow generation, irrespective of leadership changes.