Buffett’s Last Stand: Record Cash, Tariff Warning, and the Road Ahead for Berkshire

Berkshire Hathaway delivered a mixed set of first-quarter results this weekend, headlined by a 14% decline in operating income to $9.64 billion and a record cash hoard of $348 billion. Warren Buffett confirmed he will step down as CEO by the end of 2025, passing the reins to Greg Abel, his long-time successor. Insurance underwriting losses, foreign exchange headwinds, and sluggish investment results weighed on the quarter, though BNSF railroad operations showed signs of a rebound.

Notably, Buffett did not deploy capital for stock buybacks, marking a full year of abstention, and signaled he will remain patient with the record cash pile unless attractive deals emerge. The firm’s massive war chest, built largely from U.S. Treasuries, is positioned as both a defensive buffer and optionality in a turbulent macro environment. Meanwhile, Buffett used his annual meeting platform to sharply criticize punitive tariffs, warning of long-term damage to U.S. global standing and economic cooperation.

Earnings Breakdown

Berkshire’s operating earnings fell to $9.64 billion, down from $11.22 billion a year ago, largely due to a 48.6% drop in insurance underwriting profit, which declined to $1.34 billion. The company cited losses from Southern California wildfires and rising claims costs. On a per-share basis, operating EPS came in at $4.47, missing the $4.72 factset consensus. Meanwhile, investment losses and currency swings dragged net income down a steep 64% to $4.6 billion. Investment and derivatives portfolios generated $6.4 billion in losses, and currency depreciation—particularly the dollar's 4% drop against major currencies—created a $713 million forex loss.

BNSF, which had underwhelmed in previous quarters, offered a rare bright spot. It posted $2.31 billion in EBIT, up 19% year-over-year, with revenue increasing 1.2%. Management acknowledged the progress but said more work remains. Non-insurance businesses were mixed, with 21 units posting earnings growth and 28 showing declines.

Cash Hoard and Capital Deployment

Cash and equivalents surged to a record $348 billion, up from $334 billion at year-end 2024. Free cash flow hit $6.2 billion, while net stock sales continued for a tenth consecutive quarter. Berkshire made no share repurchases in Q1 and has not repurchased stock since May 2024. Buffett reiterated that share buybacks will only occur when shares are clearly undervalued and emphasized that compelling acquisition opportunities have been scarce.

When asked about plans for the cash, Buffett said large-scale capital deployment is unlikely to happen imminently but could materialize within five years. "Things don’t come along in an orderly fashion", he said, adding that the investment business is inherently opportunistic. He defended the high cash position, noting it acts as a buffer against extreme volatility and gives Berkshire flexibility to strike quickly when attractive assets become available.

Buffett's Tariff Commentary and Political Outlook

Buffett, who has largely steered clear of politics in recent years, took a firm stance against the rising wave of protectionism. Without naming President Trump directly, Buffett warned that using trade as a weapon damages long-term global goodwill and jeopardizes America’s leadership position. "Trade should not be a weapon", he said. He also criticized the fiscal deficit, calling current government spending unsustainable and warning that the widening gap between revenue and expenses risks becoming "uncontrollable".

The impact of tariffs is already being felt at Berkshire subsidiaries. berkshire hathaway automotive has seen a surge in demand ahead of new levies on imported parts. Meanwhile, the company’s 10-Q filing noted the difficulty in predicting how shifting trade policies will affect its operating businesses, which include Geico, BNSF, and Fruit of the Loom.

Succession Plan Finalized

In a momentous shift, Buffett confirmed that Greg Abel will succeed him as CEO by the end of 2025. Abel, who oversees Berkshire’s non-insurance operations, has already taken on a greater role in capital allocation. Board member Susan Decker noted that Abel had been easing into the CEO role over the past year, hinting that some recent strategic moves, including the growing tilt toward Treasuries, may have been under his guidance.

Abel's track record and operational experience have reassured shareholders, and Buffett reiterated his full confidence in him. This transition marks a new chapter for the conglomerate, though Buffett is expected to remain involved in a chairman or advisory role.

Outlook

Despite a drop in earnings, berkshire hathaway remains in robust financial health. Its diversified portfolio, strong cash generation, and fortress balance sheet position the company to weather macroeconomic uncertainty. While operating profits faced headwinds this quarter, particularly in insurance, the underlying business remains resilient. Investors will be watching closely to see how Abel charts Berkshire’s future course, especially as Buffett's era begins to sunset.