Berkshire Hathaway reported a significant increase in its third-quarter operating profit, which rose 34% year-over-year to $13.49 billion. The strong performance was primarily driven by a substantial rebound in its insurance operations and steady results from its railroad division, defying recent analyst downgrades and market skepticism.
The conglomerate's cash reserves also swelled to a new record, reaching approximately $360 billion, underscoring its cautious stance in the current market environment and its capacity for future large-scale acquisitions.
Key Takeaways
- Berkshire Hathaway's Q3 operating profit increased by 34% to $13.49 billion compared to the same period last year.
- The insurance division was a key driver, with underwriting income surging 200% to $2.37 billion.
- The company's cash pile grew to a record of roughly $360 billion, highlighting its defensive positioning.
- No share buybacks were conducted during the quarter, as the company views its stock valuation as elevated.
Insurance and Railroads Power Earnings
Berkshire Hathaway's diverse portfolio of wholly-owned businesses demonstrated resilience in the third quarter of 2025, with its core segments delivering robust results. The standout performer was the company's insurance arm, which saw its underwriting income climb to $2.37 billion, a 200% increase from the prior year.
This result came as a surprise to some market observers who had anticipated pressure on the insurance business, particularly from potential expenses related to auto policies in Florida and shifts in the reinsurance market. However, the division navigated these challenges effectively.
A Core Business Engine
Insurance has long been a cornerstone of Berkshire Hathaway's financial strategy. In 2024, insurance underwriting and investments accounted for a quarter of the company's $89 billion in net earnings. The segment provides a durable source of income and generates "float"—premiums collected upfront that can be invested before claims are paid out.
The BNSF Railway also contributed positively to the quarter's earnings. While revenue growth was modest at 1.7%, reaching $5.99 billion, the division managed its expenses effectively, leading to slightly improved margins. The railroad remains a critical component of the U.S. logistics network, providing stable cash flow and benefiting from high barriers to entry.
Record Cash Pile Signals Caution
One of the most watched figures in Berkshire's financial reports is its cash position, which has reached a new high. After accounting for payables for T-bills purchased but not yet settled, the company's war chest stands at approximately $360 billion.
This massive liquidity provides significant downside protection and flexibility. In an uncertain economic climate, the cash buffer helps reduce share price volatility. It also positions Berkshire to make substantial acquisitions should market valuations become more attractive.
No Stock Repurchases: Despite its massive cash reserves, Berkshire Hathaway did not buy back any of its own shares in 2025. The company's stock is trading at a price-to-book value of 1.54x, which management evidently considers too high for repurchases. Historically, buybacks have been more likely when the ratio is closer to 1.25x.
Instead of deploying capital into acquisitions or buybacks, the company has remained a net seller of equities and has invested the majority of its cash in short-term U.S. Treasury bills. While this strategy offers safety, it can also act as a drag on overall returns during bull markets, as T-bill yields may lag behind equity market gains.
Navigating Future Headwinds
While the third-quarter results were strong, Berkshire Hathaway faces several potential challenges on the horizon. The company's leadership has acknowledged that changes in U.S. policy could impact its key business units.
Potential Policy Impacts
The BNSF Railway's performance is closely tied to international trade flows. An escalation of trade tensions, particularly with China, could reduce transported volumes through its West Coast-focused infrastructure, negatively affecting revenue.
Berkshire Hathaway Energy (BHE) is also navigating policy shifts. The division's net earnings fell 9% in the third quarter to $1.50 billion, partly due to reduced income tax benefits. The ongoing phase-out of federal tax credits for clean energy projects introduces uncertainty for future investments and could potentially lower returns on new wind and solar developments.
Between the first quarter of 2019 and the third quarter of 2025, renewable energy tax credits accounted for an average of 6.1% of BHE's quarterly operating income, highlighting their financial importance to the unit.
Leadership Transition and Outlook
The strong quarterly performance comes at a pivotal time for Berkshire Hathaway. Founder and CEO Warren Buffett is set to step down from his role at the end of 2025, with Greg Abel slated to take over leadership of the sprawling conglomerate. Buffett is expected to remain on the board.
Some investors have worried about the loss of the "Buffett premium" on the stock, but the latest results may help ease those concerns. The operational strength shown in the third quarter is seen by many as a reflection of Abel's management, suggesting the company is in capable hands for its next chapter.
Despite underperforming the S&P 500 this year as investors chased high-growth technology stocks, Berkshire Hathaway remains a defensive holding for many. Its vast and profitable operating businesses, combined with its fortress-like balance sheet, position it as a resilient choice for investors navigating an increasingly complex economic landscape.
