Berkshire Hathaway 10-Qquarter ended 2026-06-30

Executive Summary

Berkshire Hathaway delivered higher Q2 revenue and operating-business profit, but the doubling of GAAP earnings was driven chiefly by investment gains rather than a comparable acceleration in its businesses. Manufacturing, rail and utilities improved, while GEICO’s rising claims costs and lower short-term interest rates pressured insurance results. Berkshire used its liquidity to acquire OxyChem, repurchase shares and commit to a homebuilder acquisition, while retaining substantial cash and Treasury bills. For investors, the question is whether those deployments can add durable earnings as investment gains fluctuate and wildfire liabilities remain unresolved.

Key Financial Highlights

• Cash conversion: H1 operating cash flow was $21.7B vs GAAP net earnings of $35.8B; capital expenditures and equipment held for lease were $10.6B, yielding $11.0B of free cash flow. Investment gains contributed substantially to earnings without equivalently increasing operating cash flow.
• Capital allocation: Berkshire repurchased $4.8B of stock in H1. Class A shares outstanding fell by 14,734, while Class B shares outstanding rose by 12.3M; conversions complicate a direct comparison of either class’s share-count change with repurchase spending.
• Liquidity and investment exposure: Cash, cash equivalents and Treasury bills, net of unsettled-purchase payables, totaled $359B. Equity securities had a $324B fair value, with five public holdings accounting for 66% of that portfolio.

Business Developments

The $9.4B cash acquisition of OxyChem closed on 1/2/2026. It contributed $1.4B of Q2 revenue and $0.149B of pretax earnings; its H1 earnings also absorbed acquisition-accounting and transition costs. Berkshire subsequently closed its $6.8B cash acquisition of Taylor Morrison on 7/24/2026, expanding its exposure to housing despite soft home-construction demand.

BNSF’s Q2 revenue rose 14.6%, supported by higher freight volume and revenue per unit, although fuel costs rose sharply and coal volumes declined. Berkshire Hathaway Energy’s H1 earnings attributable to Berkshire shareholders rose 11.3%, aided by utility margins and tax credits, partly offset by wildfire-prevention and interest costs. Across manufacturing, service and retailing, Q2 revenue rose 15.2%; OxyChem helped industrial products, while McLane faced customer losses and weaker margins.

Insurance results were less uniform. GEICO’s H1 premiums earned rose 3.0%, but its loss ratio worsened by 4.9 percentage points to 75.3% as claim frequency, severity and underwriting expenses increased. Elsewhere, the absence of significant catastrophe events and favorable prior-year reserve development supported underwriting. A Tokio Marine reinsurance agreement began on 4/1/2026 and generated $0.483B of Q2 premiums written. Lower short-term rates reduced H1 pretax insurance investment income by 7.6%, despite insurance float rising to ≈$178B.

Risk Assessment

• Wildfire litigation: PacifiCorp estimated $0.572B of unpaid liabilities at 6/30/2026; further losses beyond accrued amounts are reasonably possible, cannot be estimated and could materially affect liquidity or financial condition.
• Investment concentration and earnings volatility: Five holdings represent 66% of the public-equity portfolio’s fair value, so market-price changes can move GAAP earnings substantially without indicating a change in operating performance.
• Insurance claims and reserves: GEICO’s worsening loss ratio and $153B of estimated unpaid property-and-casualty insurance and reinsurance losses expose future earnings to claim trends, reserve revisions and catastrophes.
• Funding and regulated returns: Berkshire Hathaway Energy had $61.8B of borrowings and issued $4.6B of term debt at a 5.8% weighted-average rate in H1; interest costs and regulatory decisions can constrain returns.
• Asset values and legal claims: Kraft Heinz’s $8.76B carrying value exceeded its $7.69B fair value, leaving further impairment possible; HomeServices also faces unresolved antitrust litigation.

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 is deploying capital into chemicals and housing while its operating subsidiaries fund substantial investment. Its liquidity provides flexibility, but the investment case depends more on sustained operating returns and manageable liabilities than on another quarter of market gains.

• Insurance profitability: Monitor GEICO’s loss ratio against H1’s 75.3%; improvement would indicate premiums are catching up with claims costs.
• Acquisition returns: Monitor OxyChem’s pretax earnings after transition costs and Taylor Morrison’s initial contribution against the $16.2B combined cash purchase prices.
• Cash and contingent liabilities: Monitor operating cash flow after capital expenditures alongside PacifiCorp’s unpaid wildfire liabilities; deterioration in either would narrow Berkshire’s capital-allocation flexibility.