Berkshire Hathaway (BRK/A, BRK/B) reported first-quarter earnings of over $10.1 billion, above the $4.6 billion in the same quarter of 2025, due to higher operating profits and a smaller loss in the investment portfolio. Operating earnings, which remove the distortion from market changes and better reflect the firm’s earnings power, grew by 17.7% for the quarter versus 2025. Per-share operating income increased by 17.7% for the quarter, with a very small share repurchases year-to-date. At the beginning of this year, Greg Abel took over as CEO, while Warren Buffett retains the title of Chairman. Ajit Jain remains as Vice Chairman of Insurance Operations.
Berkshire’s most significant business by operating earnings is insurance, followed by the manufacturing, service, and retailing (MSR) segment.
Berkshire’s insurance earnings growth in the first quarter benefited from easier comparisons since the first quarter of 2025 included claims from the California wildfires. Non-control businesses and other income rose significantly, primarily due to accounting for foreign currency (FX) swings on Berkshire’s non-dollar borrowing. Excluding the FX impact on the “other” segment, operating earnings were 7.2% higher than in 2025. If insurance and FX are excluded, the non-insurance businesses grew operating earnings by 9.4% over 2025.
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 about $500 million higher than on December 31, 2025, at $176.9 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 $123,026 above the $122,373 level at the end of 2025. Share repurchases aided per-share float growth slightly over the past quarter.
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 quarter. Underwriting profit is the positive difference between the insurance premium and all insurance claims and expenses. For example, GEICO had a combined ratio of 87.3% in the first quarter, meaning that 87.3 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. Abel said at the annual meeting that policies in force at GEICO grew by 2% in the first quarter, but Progressive (PGR) grew them by 11%.
For the quarter, investment income was 7.4% below 2025, primarily due to lower short-term interest rates.
In discussing the insurance business at the annual meeting, Abel noted that the first quarter was a “very benign environment,” with no catastrophic events. He said the insurance business is “becoming a more challenging environment” with more “capital coming into the industry.” He expects a softening in the insurance business for the remainder of the year.
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 13.4% 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 first quarter, demonstrating productivity gains.
As highlighted in the key takeaways from the Berkshire annual meeting, Abel provided quantitative measures of where BNSF could improve and used peer comparisons to judge how well the railroad is executing. The bad news is that BNSF ranked fifth out of six railroads in profitability according to operating margins. The better news is that it has been making progress and moved up to fourth in the first quarter.
Utilities and Energy
Berkshire Hathaway 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 slightly positive on the headline numbers, with after-tax operating earnings rising 1.3% year over year for the first quarter. After-tax earnings were driven by better results from the natural gas pipeline business and higher federal income tax credits, partially offset by lower earnings from US utilities and other businesses. Real estate had a slightly lower loss than in the first quarter of 2025.
At the annual meeting, Abel spoke about Berkshire’s liabilities stemming from Pacificorp’s partial responsibility for the wildfires, but noted that there needs to be legislation across states to deal with the liability issue fairly. His discussion of the business at the meeting can be summed up by his previous statements: “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.” Reading between the lines, it seems Berkshire felt a proper compact could not be reached with Washington state. In February, an agreement was reached to sell Pacificorp’s Washington operations for $1.9 billion in cash, with the deal expected to close in 2027.
Manufacturing, Service, and Retailing (MSR)
Pretax earnings grew by 5.7% versus the first quarter last year. This segment comprises many diverse companies, so this analysis will highlight some of the group’s strengths and weaknesses.
Abel spoke about Clayton Homes being a bellwether for Berkshire’s housing-related building products businesses. As evidence of the pressure on that sector of the economy, Clayton’s pre-tax earnings were 8.7% lower than in 2025.
On a positive note, robust aerospace demand has been a tailwind for Berkshire’s businesses in the space. Precision Castparts, which provides aerospace parts, grew pre-tax earnings by 32.9% year-over-year. The service group saw a 21.1% increase in pretax earnings for the year, primarily attributable to TTI, an electronic component distributor, and to a lesser extent, aviation services (NetJets and FlightSafety).
The 29.6% growth in pre-tax earnings in consumer products was driven primarily by Forest River, Duracell, and Brooks Sports. Unfortunately, the improvement in Duracell was due to the recognition of US tax credits rather than a fundamental business improvement. The improvement at Forest River was primarily cost-cutting, but Brooks saw better sales and margins.
The retailing group reported slightly higher pretax earnings, up 1.0% for the quarter. The most critical portion of the retailing segment is Berkshire Hathaway Automotive (BHA), which owns over 80 auto dealerships. BHA reported 3.7% higher earnings than in 2024. Pretax profits for the remainder of the retailing group declined by 11.9% due primarily to “sluggish customer demand.”
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 129.8% due to some accounting treatment of hedges during a period of sharp increases in fuel costs. The gains on the value of Pilot’s fuel inventories aren’t shown in the numbers until sold. There were also higher operating and maintenance costs.
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 gains were generated by bonds issued by Berkshire Hathaway, 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.
Equity method earnings were higher due to better earnings at Occidental Petroleum (OXY). Acquisition accounting expenses are also reflected in this segment. These expenses result from the amortization of intangible assets 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 52% publicly traded stocks, with 44% in cash.
Berkshire was a net seller of almost $8.2 billion in publicly traded stocks in the first quarter, the fourteenth straight quarter of Berkshire Hathaway’s net sales of stocks. Berkshire bought $15.9 billion of stocks while selling $24.1 billion, so it was a busy quarter. Clues point to further possible trimming of Bank of America (BAC) and Apple (AAPL), but the actual transactions won’t be known until the upcoming 13F filing on May 15.
Abel made the case that Berkshire is just not seeing enough opportunities that meet its stringent buying criteria. He provided a robust framework for making investment decisions consistent with Buffett’s. He needs to understand the business and its risks. Further, he needs to understand the business’s likely future economics and possess a capable, honest management team. Lastly, the price must be at a level that provides a margin of safety.
Buffett addressed the growing cash pile during his short Q&A session with CNBC’s Becky Quick, noting that there weren’t a ton of opportunities that met Berkshire’s investment criteria. He said, “Prices for a whole lot of things look very silly.”
Summary And Scorecard
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 Greg Abel’s capital allocation decisions, which he became solely responsible for at the beginning of 2026.
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 while Greg Abel is at the helm.
Increase operating earnings: Trailing 12-month operating earnings were 0.6% higher 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.
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 Abel 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. After six straight quarters of no share buybacks, Berkshire repurchased $235 million of its stock in the quarter.
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 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 quarter were made at around 1.4 times book value, which is where we have seen previous buybacks. 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.”
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 15.1% compound growth rate, while operating earnings per share have done 1.9 percentage points better at 17.0%. 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 $397.4 billion. Cash as a percentage of Berkshire Hathaway’s size is the highest on record, at 31.7%. 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 should be subtracted, resulting in a slightly lower total cash of $380.2 billion. In any case, the narrative remains unchanged. This cash hoard provides flexibility to take advantage of opportunities, including repurchasing its stock.
There have been no major opportunities seized so far in 2026, but Berkshire completed a relatively small acquisition of OxyChem from Occidental Petroleum (OXY) for $9.7 billion.
Summary Conclusions
Greg Abel began his reign as CEO with a slightly better-than-expected earnings report. More importantly, he demonstrated a deep understanding of Berkshire’s many business units and a commitment to continuous improvement at the annual meeting.
Berkshire’s first-quarter operating earnings rose by 17.7% year-over-year. The insurance business was the main driver of the improved earnings. Operating earnings were flattered by easy comparisons in insurance due to the 2025 wildfires. Foreign exchange gains were also a significant tailwind. Stripping out the impact of foreign exchange is probably a better measure of earnings growth, with a still respectable 7.2% year-over-year increase.
Berkshire has not historically given earnings guidance, and Abel did not alter that trend. He said the insurance business is softening due to more “capital coming into the industry.” Additionally, there was mention of softening or pricing pressures stemming from the conflict with Iran, which has driven oil prices higher. While the first quarter earnings were moderately better than expected and should improve 2026 estimates, headwinds will likely keep Berkshire’s full-year operating earnings growth at the low single digits at best.
Abel was very focused on “operational excellence” as an opportunity for Berkshire going forward. Warren Buffett and Charlie Munger enjoyed greater returns and added more value through their capital allocation acumen, so they spent relatively less time on management. Abel embraces his skills as an operator and frames operational excellence as another opportunity to create value for Berkshire. Higher productivity and better performance management should be evidenced in improved margins and operating earnings over time.
Share repurchases had been off the table, but the additional value-creating lever for Abel has returned as the stock has underperformed while book value has grown. 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.”
Intrinsic Value
Berkshire’s stock price underperformed the S&P 500 in the first quarter, falling by 4.9% versus a total return of -4.3% from the S&P 500. As stocks have rallied sharply since the end of the quarter, the year-to-date underperformance has widened through May 1: Berkshire Hathaway is -5.9%, while the S&P 500 has a total return of +6.0%.
While poor short-term stock performance should generally be ignored, that is easier said than done. Using book value per share as a measure of intrinsic value, Berkshire grew its underlying value by 11.1% over the trailing twelve months. Despite this improvement in intrinsic value, the stock fell by 10.1%. Berkshire is almost certainly not going to be able to grow operating earnings and intrinsic value as quickly as it once did, just due to its size, but the fortress-like balance sheet and reasonable valuation should provide an attractive risk-to-reward for conservative investors.
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