Berkshire's operating earnings jump 34%, Buffett buys back no stock and raises cash hoard to $381 billion

Berkshire Hathaway reported a robust Q3, with operating profit surging 34% year-over-year to $13.485 billion, primarily driven by a 200% increase in insurance underwriting income. The conglomerate's cash reserves swelled to a record $381.6 billion, as it refrained from share buybacks and net sold equities for a $10.4 billion gain, while overall earnings rose 17% to $30.8 billion. This strong financial performance, which includes a recent $9.7 billion acquisition of Occidental Petroleum's OxyChem unit, occurs amidst a leadership transition as Warren Buffett prepares to step down as CEO at year-end, with Greg Abel assuming the role, an announcement that previously led to a double-digit decline in Berkshire's shares.

Analysis

Berkshire Hathaway reported a robust third quarter, with operating profit surging 34% year-over-year to $13.485 billion, primarily driven by a more than 200% increase in insurance underwriting income to $2.37 billion. Overall earnings, including investment gains, also rose significantly by 17% to $30.8 billion year-on-year, indicating strong underlying business performance.

The conglomerate's capital allocation strategy saw its cash pile swell to a record $381.6 billion, surpassing the previous high of $347.7 billion, as it refrained from share buybacks and net sold equities for a $10.4 billion taxable gain. This substantial liquidity was partially deployed in the $9.7 billion acquisition of Occidental Petroleum's OxyChem unit, marking Berkshire's largest deal since 2022.

Despite this strong financial showing, Berkshire's Class A and B shares are up only 5% in 2025, significantly underperforming the S&P 500's 16.3% gain. This underperformance and a double-digit tumble from all-time highs reflect the market's reaction to Warren Buffett's impending step down as CEO at year-end, with Greg Abel set to take over, highlighting the perceived "Buffett premium."

Key Decisions for Investors

• Investors should closely monitor Greg Abel's initial capital allocation decisions and future annual letters for strategic shifts post-Buffett's CEO transition.
• Evaluate Berkshire's ability to effectively deploy its record $381.6 billion cash hoard in the current market, considering the recent $9.7 billion OxyChem acquisition as a benchmark for future capital deployment.
• Assess if the market has fully priced in the "Buffett premium" discount, potentially offering a long-term entry point for investors focused on intrinsic value rather than short-term leadership sentiment.