Berkshire Hathaway (NYSE:BRK.B) shares reached a record high on Monday, as investors cheered the company's robust second-quarter earnings and the accelerated capital deployment strategy under new Chief Executive Greg Abel. The Class B shares advanced as much as 3.1% to $537.74, while Class A shares gained up to 3.3% to $806,102.81, marking the stock's highest level since Warren Buffett announced his retirement in May 2025.
The surge came as the broader U.S. equity markets remained relatively stable, with the S&P 500 and the Nasdaq holding steady. Investors responded positively to Abel's leadership, which has combined improved operating performance with a more aggressive approach to capital allocation. The company reported operating earnings of $12.98 billion for the second quarter, a 16.3% increase from the $11.16 billion recorded in the same period last year.
However, a closer look at the numbers reveals a more nuanced picture. A significant portion of the earnings boost came from the volatile “Other” segment, which surged by $1.24 billion, accounting for 68.1% of the total increase. This segment was primarily driven by favorable foreign-exchange effects, while the core operating businesses saw a more modest 5.2% rise in earnings, reaching $11.71 billion compared to $11.13 billion in the prior-year quarter.
Total revenue for the quarter climbed 10% to $101.81 billion, while net earnings more than doubled to $25.67 billion, largely due to unrealized gains on equity investments, which are required to be included in reported net income under U.S. accounting standards. The company's cash and Treasury bills position decreased by $15.5 billion to $364.7 billion, reflecting the significant capital deployment during the quarter.
Capital allocation was a key focus for investors. Berkshire spent $4.5 billion on share buybacks and invested $23.5 billion in other equities, including a $10 billion purchase of Alphabet Inc. (NASDAQ:GOOGL) shares. The company also maintained its stake in Apple Inc. (NASDAQ:AAPL) as one of its top five equity holdings. The total gross equity deployment of $28.0 billion was 1.81 times the quarterly reduction in cash and Treasury bills, underscoring Abel's more aggressive approach compared to his predecessor.
Wall Street analysts offered mixed reactions to the results. UBS analyst Brian Meredith reiterated a “Buy” rating and raised the price target on Class A shares to $906,000, suggesting a potential 12.4% upside from Monday's high. Meredith called the cash deployment “meaningful” and highlighted the company's improved capital allocation. In contrast, Keefe, Bruyette & Woods analyst Meyer Shields maintained an “Underperform” rating, citing macroeconomic uncertainty and challenges in insurance pricing, despite acknowledging the quarter as “very solid.”
While the overall earnings growth was impressive, some segments underperformed. Insurance underwriting profits declined by 13.1% to $1.731 billion, and insurance investment income fell 9.1% to $3.059 billion. Geico, the company's auto insurance arm, experienced an increase in accident claims and higher advertising costs, which weighed on the segment's results. However, manufacturing, service, and retailing operations posted a strong $869 million increase to $4.470 billion, offsetting the insurance weakness.
The railroad and energy businesses also contributed positively, with BNSF earnings rising $92 million to $1.558 billion and Berkshire Hathaway Energy gaining $189 million to $891 million. These gains helped to partially offset the declines in the insurance segments, but the core operating growth remains modest compared to the overall earnings surge.
Looking ahead, investors are closely watching whether Berkshire's buyback momentum will continue. The company repurchased an additional $3.3 billion of its stock in July, alongside the completion of the Taylor Morrison acquisition. If buybacks persist, it could reinforce the current valuation, but a slowdown might prompt investors to reassess the 5.2% growth in core operating earnings and the sustainability of the recent rally.
Berkshire's cash pile remains substantial at $364.7 billion, providing ample firepower for further capital deployment. Abel's willingness to act decisively has been well-received by the market, but the sustainability of this strategy will depend on the broader economic environment and the performance of the company's diverse portfolio. As the market digests these results, the key question remains whether the stock's record valuation is justified by the underlying fundamentals.
