When Berkshire Hathaway published its latest financial results, it attracted more than the usual attention for two reasons. First, the fourth-quarter and full-year earnings reports present the final report card for Warren Buffett’s era as the conglomerate’s chief executive. Second, it featured the highly anticipated debut shareholder letter from the company's new CEO, Greg Abel, who is inheriting a formidable legacy. Abel finds himself in a tough spot—he cannot deviate from the path set by Buffett, which has greatly benefited investors. Berkshire is sitting on a cash pile of over $373 billion, and Abel is under pressure to show more aggression.
Buffett’s legacy
The year 2025 marked a key transition at Berkshire Hathaway. Buffett stepped down as its CEO after 60 years in the role. He announced the decision at the company's annual shareholder meeting in May, citing the physical effects of ageing.
Buffett had taken control of Berkshire in 1965, when it was a struggling textile manufacturer. Alongside his partner Charlie Munger, who passed away in 2023, he built it into a sprawling conglomerate with holdings spanning insurance, railroads, energy, utilities, manufacturing, and consumer goods. The company's market value was $1.051 trillion as of early 2026.
Between 1965 and 2025, Berkshire’s shares delivered a compound annual growth rate (CAGR) of approximately 19.8%, compared with roughly 10% for the S&P 500, including dividends. This translates to a total return more than 60,000 times the initial investment, compared with 400-460 times for the index. By the end of 2025, his own net worth exceeded $150 billion. This track record made Buffett one of the most revered investors in history.
Earnings slip
While Buffett's track record is one for the history books, his finale did not reflect his lifetime of achievement by some measures. In Q4 2025, Berkshire's operating earnings—its preferred performance metric—fell nearly 30% year-on-year to $10.2 billion. The decline was primarily driven by the insurance division. Underwriting profits plummeted 54% to $1.56 billion, while insurance investment income dropped roughly 25% to $3.1 billion. Geico specifically saw underwriting profit fall by nearly half, due to rising accident claims and higher advertising expenses.
Abel flagged future challenges, noting that, after several years of rate increases, the industry is experiencing deceleration amid increased competition from new capital. Given Berkshire's strict underwriting discipline, he cautioned that this “likely means we will write less property and casualty business for a period of time”.
Still, Berkshire's diversification offered some cushion. BNSF railroad posted a 6% increase in Q4 profit, and the manufacturing, service, and retail segment recorded a 3% gain. Overall net income fell about 3% to $19.2 billion, weighed down by a $4.5 billion impairment charge on investments in Occidental Petroleum and Kraft Heinz, which ate into $13.5 billion in market investment gains during the quarter.
Market jitters
Following Buffett's unexpected announcement in early May 2025 that he would step down, Berkshire's shares fell sharply from their record high of over $809,000. The stock lost up to 14% over the following months through early August, even as the S&P 500 gained about 11% over the same period, creating the widest three-month underperformance gap relative to the index in decades. Analysts attributed the sell-off to the unwinding of the "Buffett premium", as long-term holders, including families and early investors who had held shares for generations, chose to exit ahead of the leadership change.
On the Monday following the Q4 2025 earnings release, markets reacted poorly, sending Berkshire shares down nearly 5%, and pushing the stock into negative territory for the year. The immediate trigger was the 30% drop in operating earnings, but the sell-off was compounded by investor frustration over Abel's decision to maintain the pause on share buybacks while reaffirming the company's long-standing refusal to pay a dividend.
Forever holdings
In his inaugural CEO letter, Abel aimed to reassure investors. Berkshire's foundational values and culture of financial conservatism, he wrote, "remain unchanged and will continue into perpetuity", a direct commitment to honouring the legacy built by Buffett and Charlie Munger. Abel assured the subsidiary leaders that they will continue to operate with autonomy grounded in trust and will "never have to navigate layers of bureaucracy or have short-term earnings expectations dictated to them". Abel pledged strict adherence to Buffett's framework: A strong balance sheet, debt used sparingly, and opportunities evaluated with patience.
These principles guided Berkshire into building its current portfolio. The portfolio is dominated by four companies: Apple, American Express, Coca-Cola, and Moody's. Abel said he expects these core holdings to compound over decades and intends to hold "preferably forever". Buybacks will only occur when shares trade below a conservative estimate of intrinsic value, and the long-standing resistance to paying a cash dividend will remain firmly in place.
Framing his tenure as a long-term commitment, Abel acknowledged he cannot realistically match Buffett's 60-year run, but set a clear benchmark. Twenty years from now, shareholders and their descendants will find Berkshire stronger than they left it.
Dry powder
Berkshire Hathaway's share price fell nearly 5% following its recent earnings report, partly driven by investor frustration over the company's near-record cash pile. They were concerned that Abel might not have any immediate or aggressive plans to deploy the capital.
Berkshire ended 2025 with $373.3 billion in cash and short-term US Treasury bills. Abel described the reserve as dry powder supporting a "fortress-like balance sheet". He said a portion of it was earmarked to back Berkshire's insurance operations, and the rest for deployment.
Berkshire completed a $9.7 billion all-cash acquisition of OxyChem, Occidental Petroleum's petrochemicals unit, its largest transaction in three years. Abel also flagged the acquisition of Bell Laboratories, a family-owned rodent control business, as the kind of deal Berkshire looks for: durable economics, capable managers, and no financing contingencies.
He promised that the cash build did not "signal a retreat from investing". He prefers the "ownership of productive businesses over US treasuries", and will evaluate deals deliberately, moving quickly when they meet Berkshire's criteria and saying no when they don't. Shareholders might be disappointed if he says no too often.
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