TLDR
- Berkshire’s operating earnings rose 16% to $12.98 billion in Q2
- CEO Greg Abel repurchased $4.5 billion in Berkshire stock during the quarter
- Berkshire’s cash pile dropped to $365.5 billion from a record $397.4 billion
- Berkshire became a net buyer of equities for the first time in 15 quarters, with nearly $20 billion in net purchases
- Alphabet is now among Berkshire’s five largest equity holdings after a $10 billion investment
Berkshire Hathaway posted a strong second quarter, with operating earnings climbing 16% to $12.98 billion, up from $11.16 billion a year earlier. But the numbers almost took a back seat to what CEO Greg Abel did with the cash.
Berkshire Hathaway Inc., BRK-B
Abel put roughly $14.5 billion to work through buybacks and the previously disclosed $10 billion Alphabet investment, marking a clear shift in how Berkshire is managing its record war chest.
Berkshire’s cash pile fell to $365.5 billion at the end of June, down from a record $397.4 billion at the end of March. That’s still a staggering amount, but it signals Abel is willing to act.
The company repurchased $4.5 billion of its own stock in Q2, a sharp jump from just $235 million in Q1. Most of those buybacks happened in June. Berkshire stock recently hit a new 52-week high, which may slow future repurchase activity.
Berkshire’s BRK.B stock is up 3% year-to-date, trailing the S&P 500’s 13% gain. It has picked up pace recently though, rising 9% over the last three months.
On the earnings side, Manufacturing, service and retailing earnings jumped 24% to $4.47 billion. Berkshire Hathaway Energy surged 27% to $891 million. BNSF railroad rose 6% to $1.56 billion.
Insurance was the weak spot. Underwriting earnings fell 13% to $1.73 billion, and insurance investment income dropped 9% to $3.06 billion.
Abel Breaks a 14-Quarter Streak
Berkshire had been a net seller of equities for 14 straight quarters. That streak ended in Q2, with nearly $20 billion in net stock purchases. The filing also showed Berkshire added more than $24 billion in commercial, industrial and other equities, though the specific names won’t be disclosed until a later filing.
Alphabet now sits alongside American Express, Apple, Bank of America and Coca-Cola as one of Berkshire’s five largest equity holdings. Buffett told CNBC he initiated the Google investment after consulting with Abel.
Bottom Line Profit More Than Doubled
Berkshire’s net profit more than doubled to $25.67 billion, or $17,868.44 per Class A share, helped by paper gains on investments and lapping a $3.8 billion writedown on its Kraft Foods stake from a year ago.
Buffett has long pushed investors to focus on operating earnings rather than net profit, as the latter swings with market moves.
Abel took over from Buffett as CEO in January after Buffett retired following six decades at the helm. Buffett remains chairman.
The company also completed a $6.8 billion acquisition of homebuilder Taylor Morrison, though that deal closed in July and isn’t reflected in Q2 figures.
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