Berkshire Hathaway 10-Qquarter ended 2026-03-31

Executive Summary

Berkshire Hathaway delivered modest revenue growth in Q1 2026, while reported earnings more than doubled largely because investment losses were smaller—not because operating profits doubled. BNSF and manufacturing improved, and catastrophe-free insurance results helped offset a sharp deterioration at GEICO. The $9.5B OxyChem acquisition expands manufacturing, but contributed a small pretax loss in its first quarter; meanwhile, Berkshire retained substantial liquid resources for future investment. For investors, the key question is whether operating gains can persist as insurance claims, utility wildfire exposure and acquisition costs evolve.

Key Financial Highlights

• Investment results: Pretax losses narrowed to $1.61B from $6.44B Y/Y. Securities held at quarter-end produced $3.29B of unrealized losses, partly offset by $1.65B of gains on sales; these marks explain much of the gap between earnings growth and cash-flow growth.
• Cash conversion and capital return: Operating cash flow was $10.4B vs net earnings attributable to Berkshire of $10.1B; free cash flow fell from $6.62B Y/Y as capital expenditures increased. Repurchases totaled $235M, and equivalent Class A shares outstanding declined by 320 net of issuance—a reduction of just 0.02%.
• Liquidity and funding: Insurance and Other held $374B of cash, cash equivalents and Treasury bills, net of unsettled-purchase payables. Combined Insurance and Other and Railroad, Utilities and Energy borrowings were $129B; BHE subsidiaries issued $4.6B of term debt during the quarter.

Business Developments

Insurance underwriting pretax earnings rose to $2.27B from $1.72B Y/Y, aided by the absence of significant catastrophe losses that affected Q1 2025. That improvement masks weaker GEICO economics: its pretax underwriting earnings fell to $1.42B from $2.17B as claims frequency, severity and policy-acquisition costs increased. More competitive property reinsurance pricing also reduced premiums, although a 10-year Tokio Marine quota-share arrangement began on 04/01/2026 and is expected to add meaningful volume.

BNSF benefited from higher freight volume and revenue per unit, lifting operating earnings to $2.05B from $1.82B. Manufacturing pretax earnings rose 12.6% to $3.06B on acquisitions and existing-business growth. OxyChem, acquired on 01/02/2026, added $1.2B of revenue but a small pretax loss; its integration, rather than initial sales contribution alone, will determine the transaction’s near-term return. Elsewhere, McLane earnings fell 20.4%, and Pilot’s higher fuel-price-driven revenue did not translate into profit: its pretax margin turned negative.

Berkshire’s stated emphasis on liquidity and safety over yield leaves it able to fund acquisitions and commitments without relying on equity sales. BNSF and BHE forecast $12.4B of capital expenditures over the rest of 2026, concentrating future spending in infrastructure businesses.

Risk Assessment

• GEICO claims and pricing: Its loss ratio rose 4.9 percentage points to 73.9%, so continued bodily-injury inflation could erode underwriting profits despite premium growth.
• Insurance estimates and catastrophes: Net unpaid-loss liabilities were $117B, and Q1 benefited from $499M of favorable prior-year reserve development; adverse revisions or major events could reverse those benefits.
• PacifiCorp wildfires: Estimated unpaid liabilities fell to $577M after settlements, but losses beyond accrued amounts remain reasonably possible; an 04/08/2026 appellate reversal improved the litigation position without resolving outstanding claims.
• Investment concentration and valuation: Five holdings represented 61% of equity-securities fair value, exposing reported earnings and equity to a small group of stocks; Kraft Heinz’s $8.69B carrying value exceeded its $7.32B fair value, creating impairment risk.
• Capital-intensive operations: BHE borrowings rose $3.2B to $62.5B as utilities faced higher operating and interest costs, while planned infrastructure spending competes with other uses of cash.
• Operating-cost pressure: Pilot’s negative margin and Lubrizol’s warning of higher input and supply-chain costs show that revenue growth may not translate into profit.

This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: FY2025 10-K.

Strategic Outlook and Investor Actionables

Berkshire enters the next quarter with substantial liquidity and a broader manufacturing portfolio, but the operating thesis depends on underwriting discipline and returns from capital-intensive businesses—not investment-market gains. Monitor:

• GEICO: Loss ratio and pretax underwriting earnings; stabilization would support a recovery in insurance profits.
• OxyChem and manufacturing: OxyChem pretax results alongside manufacturing margin; improvement would show whether the acquisition adds earnings, not just revenue.
• PacifiCorp and capital spending: Unpaid wildfire liabilities, new claims and BNSF/BHE expenditures; rising obligations without corresponding operating gains would weaken the cash-generation outlook.