Berkshire Hathaway's Earnings Disappointment and Palantir's Earnings Optimism: A Tale of Two Tech-Value Plays

In the second quarter of 2025, two titans of the investment world painted starkly different pictures of corporate performance and investor sentiment. Berkshire Hathaway, the sprawling conglomerate led by Warren Buffett, reported a 4% decline in operating earnings to $11.16 billion, while Palantir Technologies, a high-growth AI software provider, shattered expectations with a 48% year-over-year revenue surge to $1 billion. These divergent results underscore a structural shift in 2025 markets: the waning allure of legacy value stocks and the ascendance of AI-driven equities as the new engines of growth.

Berkshire's Earnings: A Resilient Core, But Structural Headwinds

Berkshire Hathaway's Q2 performance was a mixed bag. While its railroad (BNSF) and energy segments showed resilience—BNSF's operating earnings rose 11.5%—the insurance business, a cornerstone of its operations, faltered. Insurance underwriting earnings plummeted 12% to $2 billion, and a $5 billion impairment charge on its Kraft Heinz investment further dented results. Excluding volatile segments like insurance and foreign currency swings, operating earnings still grew 13% year-over-year, but the broader narrative was one of stagnation.

Berkshire's cash reserves, however, remain a fortress, with $344.1 billion in liquidity as of June 30, 2025. Yet, the company has been a net seller of equities for 11 consecutive quarters, and Buffett's impending leadership transition—Greg Abel to assume CEO duties by year-end—has introduced uncertainty. Investors are also wary of the potential fallout from U.S. tariffs, which Buffett warned could “significantly impact” operations.

For years, Berkshire's appeal lay in its “moat” strategy: durable businesses with low capital needs and high margins. But in an era where AI and software are redefining industries, the conglomerate's diversified but low-growth subsidiaries are losing luster. The Kraft Heinz write-down and Buffett's admission that he overpaid for the stake have further eroded confidence in his ability to replicate past successes in a rapidly changing world.

Palantir's Earnings: The AI Gold Rush in Action

Palantir Technologies, by contrast, has become the poster child for AI-driven growth. Its Q2 results were nothing short of meteoric: revenue hit $1 billion for the first time, with U.S. government revenue up 53% and commercial revenue nearly doubling. The company's Rule of 40 score—a metric combining growth and profitability—soared to 94, far exceeding industry benchmarks.

Palantir's success is rooted in its ability to monetize AI in high-stakes sectors. Its software is now used by federal agencies to detect mortgage fraud in seconds and by hospitals to optimize resource allocation. The company's Rule of 40 score—a metric combining growth and profitability—soared to 94, far exceeding industry benchmarks.

Investor enthusiasm is reflected in its valuation. Palantir's market cap now exceeds $379 billion, despite a price-to-forward-earnings ratio of 276. This premium is justified by its expanding Total Contract Value (TCV), which hit $2.27 billion in Q2, and its elite technical talent pipeline. CEO Alex Karp has positioned the company as a bridge between AI's theoretical potential and real-world applications, a narrative that resonates in a market hungry for tangible AI ROI.

The Investor Sentiment Shift: From Patience to Urgency

The contrast between these two companies reflects a broader market transformation. Legacy value investors, long enamored with Berkshire's conservative, long-term approach, are now questioning whether Buffett's playbook can thrive in an AI-first world. Meanwhile, investors are flocking to high-growth AI plays like Palantir, where scalability and disruptive potential promise exponential returns.

This shift is evident in capital allocation trends. Berkshire's 11th consecutive quarter of stock sales contrasts sharply with Palantir's $569 million in adjusted free cash flow and its aggressive reinvestment in AI talent. The latter's current ratio of 6.49 and minimal debt (0.05 debt-to-equity ratio) further bolster its appeal as a financially disciplined growth story.

Investment Implications: Balancing the Old and the New

For investors, the key lies in understanding the trade-offs between these two models. Berkshire's strengths—its vast cash reserves, stable cash flows, and strategic leadership transition—position it as a defensive play in uncertain markets. However, its lack of high-growth AI exposure and Buffett's aging business model limit its upside.

Palantir, on the other hand, embodies the risks and rewards of the AI gold rush. Its high valuation and dependence on government contracts pose challenges, but its Rule of 40 score and expanding TCV suggest it is capturing a significant share of the AI value chain. Investors must weigh the company's aggressive reinvestment in AI production use cases against the risk of overvaluation.

In conclusion, 2025 marks a pivotal year for investor sentiment. While Berkshire's earnings disappointment highlights the limitations of traditional value investing, Palantir's optimism signals the dawn of a new era where AI-driven growth dominates capital flows. For a balanced portfolio, investors might consider pairing Berkshire's defensive resilience with a strategic allocation to high-growth AI plays like Palantir—provided they can stomach the volatility. The future belongs to companies that can adapt to the AI revolution, and the market is already betting on that.