Buffett’s Final Bow: Berkshire’s Profits Slide 30% as Greg Abel Inherits a $373 Billion War Chest—What Happens Next?
3min read Berkshire Hathaway’s latest earnings marked the end of an era. The fourth quarter was Warren Buffett’s final period as CEO before handing the reins to Greg Abel, closing a six-decade chapter that reshaped American capitalism. The results themselves were underwhelming, but the bigger story is what they signal about leadership, capital allocation, and the future direction of a $800-plus billion conglomerate now firmly in transition mode.
Operating earnings in the fourth quarter fell 30% year over year to $10.2 billion, or roughly $4.72 per Class B share, well below the $5.73 consensus estimate. Full-year 2025 operating income totaled $44.5 billion, down from $47.4 billion the prior year. While some of the quarterly decline reflected a $1.56 billion noncash goodwill impairment tied primarily to Pilot and other subsidiaries, even adjusting for that item, operating profits were still down meaningfully. The headline takeaway: this was not a strong finish to Buffett’s tenure.
The weakness was concentrated in insurance, the heart of Berkshire. Insurance underwriting profits dropped 54% in Q4 to $1.56 billion, reflecting more competitive pricing conditions in property and casualty markets and less favorable underwriting dynamics. Insurance investment income also fell nearly 25% to $3.07 billion as lower interest rates reduced returns on the float. For the full year, underwriting profits declined to $7.26 billion from $9 billion, and investment income eased to $12.5 billion from $13.6 billion. That combination weighed heavily on overall operating results.
Outside insurance, results were mixed. BNSF Railway delivered modest growth, with operating income up 5.4% in the quarter to $1.35 billion, though management acknowledged margins still lag industry leaders. Berkshire Hathaway Energy saw operating earnings slip about 5%, reflecting regulatory and cost pressures. Meanwhile, the manufacturing, service, and retailing segment posted a 3.3% increase in operating income to $3.37 billion, offering some stability. The “Other” category, however, collapsed to $159 million from $1.7 billion a year ago, further dragging on consolidated results.
Despite softer earnings, Berkshire’s balance sheet remains its defining feature. The company ended the year with approximately $373.6 billion in cash, down slightly from $381 billion in Q3 but still near historic highs. When combined with its $298 billion equity portfolio, Berkshire holds roughly $671 billion in liquid assets—about 60% of its current market capitalization. That scale of liquidity is both a strength and a point of debate. Bulls see an “adamantine” fortress balance sheet that provides safety and optionality in volatile markets. Bears see a growing pile of idle capital that is not being deployed aggressively.
Abel addressed that criticism directly in his inaugural shareholder letter, emphasizing discipline over urgency. He reiterated that share repurchases remain an option when Berkshire trades below intrinsic value, but the company has not bought back stock since May 2024. No buybacks occurred in Q4 or in January. Importantly, Abel must now consult Buffett, who remains chairman, on repurchase decisions—a subtle but notable governance shift. The buyback drought suggests management does not view current valuation levels as compelling.
On dividends, the message was unequivocal. Berkshire will not pay one as long as retained earnings can generate more than a dollar of market value for each dollar kept. With Buffett still influential on the board, a dividend appears unlikely anytime soon. Instead, capital will remain available for acquisitions, equity investments, or opportunistic buybacks. Yet Berkshire has been a net seller of equities for three consecutive years and made few major acquisitions, even as cash levels swell.
Portfolio concentration remains a hallmark. Berkshire continues to hold large stakes in Apple, American Express, Coca-Cola, and Moody’s, and Abel indicated that approach will persist. The company also recorded a $4.5 billion impairment related to Kraft Heinz and Occidental Petroleum, though investment gains in the quarter totaled $13.5 billion overall. Management again cautioned investors against focusing on short-term swings in investment income.
The stock reaction was muted, dipping slightly but largely holding near the psychologically important $500 level for the B shares. Broader geopolitical volatility, including rising tensions in the Middle East, may have contributed to the weakness. Still, the earnings report did little to excite investors. At roughly 1.5 times book value and around 24 times projected 2026 operating earnings, Berkshire is not cheap, particularly with insurance profitability under pressure and low single-digit earnings growth expected.
Ultimately, this quarter was less about numbers and more about legacy and continuity. Buffett exits as CEO having delivered a compounded annual gain of 19.7% since 1965—an almost unfathomable 6,000,000% total return. Abel inherits a company with unmatched financial strength but also enormous expectations. The challenge ahead is clear: deploy capital effectively, navigate softer insurance markets, and prove that Berkshire’s culture of discipline and patience can thrive without the Oracle at the helm.
