Berkshire's Earnings Jump 34% but Stock Falls Behind as New CEO Looms

Berkshire Hathaway Inc. reported a 34% year-over-year surge in operating earnings to $13.5 billion in the third quarter, driven by robust performance in its insurance underwriting segment, as the conglomerate's cash reserves swelled to a record $381.7 billion, according to Business Insider. The results mark a sharp rebound from back-to-back declines in earlier quarters and come amid the transition of leadership from 95-year-old CEO Warren Buffett to Greg Abel, who will assume the role in January 2026. Despite the strong earnings, Berkshire's stock has underperformed the S&P 500 this year, raising questions about its future direction without Buffett's direct oversight.

The insurance segment, a cornerstone of Berkshire's operations, saw underwriting profits more than triple to $2.37 billion, fueled by lower catastrophe-related losses and favorable claims developments. This contrasted with a 13% decline in net investment income to $3.2 billion, attributed to falling interest rates and capital distributions. The company also sold $6.1 billion in shares during the quarter, though it continued its streak of no share repurchases, which has contributed to the ballooning cash pile.

Berkshire's leadership transition has dominated investor sentiment. Buffett's announcement in May that he would step down as CEO at year-end sent shares down nearly 12% from their peak, though operating earnings growth has since provided some stability. The company's cash reserves now exceed $380 billion, a figure that has sparked speculation about potential large-scale acquisitions or strategic shifts under Abel. Last month, Berkshire announced its largest acquisition since 2022, agreeing to pay $9.7 billion for Occidental Petroleum's chemical business, OxyChem.

The Gates Foundation Trust, another major player in the market, has a significant stake in Berkshire, holding $11.7 billion in the conglomerate as part of a portfolio concentrated in three stocks—Microsoft, Berkshire, and Waste Management—which account for 67% of its $47.78 billion portfolio, according to Benzinga. The foundation is currently under Senate scrutiny over its $23 million in grants to Chinese entities, raising questions about its compliance with tax-exempt status rules.

Berkshire's railroad segment, BNSF, posted a 4.8% year-over-year increase in after-tax earnings to $1.45 billion, driven by higher consumer freight volumes. Conversely, its energy division saw profits fall 8.6% to $1.49 billion due to weaker utility and pipeline performance. The manufacturing, service, and retailing segment, however, improved by 8.2% to $3.62 billion.

Analysts note that Berkshire's performance highlights the challenges of managing a sprawling portfolio in a low-interest-rate environment. While the company's operating earnings reflect strong operational execution, its reliance on investment gains and its lack of buybacks have left some investors cautious. With Buffett's era drawing to a close, the market will closely watch how Abel navigates Berkshire's vast cash reserves and its evolving business landscape.