"God of Stocks" Curtain Call Season: Berkshire Hathaway's Q4 Operating Profit Drops 30%, Cash Piles Up

【Source: Global Times】

【Global Times Financial Report】On Saturday (February 28), legendary investor Warren Buffett’s Berkshire Hathaway released its Q4 2025 financial report. This is also Buffett’s final full quarter as CEO at age 95. The report shows that, due to weak insurance business performance, the company’s operating profit in Q4 declined significantly, but its cash reserves still attracted market attention.

The report indicates Berkshire Hathaway’s Q4 operating profit was $10.2 billion, down more than 29% from $14.56 billion in the same period last year.

By business segment, the insurance sector was the main reason for the performance decline. Insurance underwriting operating profit fell 54% year-over-year, from $3.41 billion to $1.56 billion; insurance investment operating profit also dropped nearly 25%, from $4.088 billion to $3.1 billion.

In terms of net profit, Berkshire’s Q4 net profit slightly decreased from $19.69 billion last year to $19.2 billion, a 2.5% decline. Notably, this figure was affected by $4.5 billion in impairments related to Kraft Heinz and Western Oil investments, offsetting the $13.5 billion investment gains for the quarter.

For the full year 2025, Berkshire’s operating profit was $44.49 billion, below last year’s $47.44 billion; annual net profit fell from $89 billion to $66.97 billion.

The company reiterated in the report that investors should not overly focus on short-term portfolio performance, as accounting rules require unrealized gains and losses to be included in net income, which can cause significant volatility. Buffett has always emphasized that operating profit is a more appropriate measure of company performance.

Despite performance pressures, Berkshire’s cash flow remains strong. In 2025, Berkshire continued its net stock selling strategy. As of the end of Q4, the company’s cash reserves, though slightly down from the record $381.6 billion in Q3, still remained high at $373.3 billion.

Market analysts believe that the massive cash reserves reflect Buffett’s cautious stance on current market valuations and also leave ample room for his successor to operate.

As 2025 comes to an end, Buffett officially handed over the CEO role to long-time deputy Greg Abel, while remaining as Chairman. In January, Abel officially took over, marking Berkshire’s transition into the “post-Buffett era.”

In the annual letter to shareholders released simultaneously, Abel pledged to continue Buffett’s culture of financial discipline and capital prudence. Data shows that since Buffett took over in 1965, Berkshire has achieved an average annual compound growth rate of 19.7%, nearly double that of the S&P 500 during the same period. Over this time, Berkshire’s total growth exceeded 60,000 times, far surpassing the S&P 500’s approximately 460 times.

However, recent stock performance indicates the market is in an adjustment phase. Before the announcement last May, Berkshire A shares hit all-time highs, then retreated. In 2025, Berkshire A shares rose 10%, underperforming the S&P 500’s 16.4% gain.

Regarding performance fluctuations, analysts point out that the decline in Berkshire’s Q4 operating profit mainly results from natural insurance cycle fluctuations and catastrophe losses, which are normal industry phenomena. Although underwriting profit shrank significantly, Berkshire’s non-insurance businesses like utilities and energy provided some stability. Overall, the company’s fundamentals remain solid.

As for the over $370 billion in cash reserves, analysts believe this reflects Buffett’s consistent “wait-and-see” investment philosophy. In the current high valuation environment of U.S. stocks, holding cash not only mitigates risks but also provides Abel with great flexibility for future capital allocation.

While Buffett’s retirement marks the end of a legendary era, Berkshire’s culture has been deeply embedded in its DNA. Abel’s statements in the shareholder letter reassured the market, confirming that he will continue to adhere to value investing and long-term principles. In the short term, underperformance relative to the market is more driven by market sentiment, but in the long run, Berkshire’s strong cash flow generation and unique business model still hold significant long-term investment value. (Wen Xin)