Berkshire Hathaway Grew 16%, With Help From Currency

Berkshire’s second-quarter revenue reached $101.81B, up 10.0% from $92.52B in Q2 FY2025. The supplied quarterly data show pre-tax income of $32.06B and a 31.5% pre-tax margin, compared with 15.9% a year earlier. Free cash flow calculated from the XBRL table increased to $5.57B from $5.23B, but that measure is not economically meaningful for a financial company whose insurance and investment cash flows are integral to operations.

The cleaner earnings measure also improved. Operating earnings, which exclude investment gains and certain impairments, rose 16.3% to $12.98B from $11.16B. For the first six months, operating earnings increased 17.0% to $24.33B from $20.80B. This is more informative than the doubling in reported net income because Berkshire’s equity holdings can create large unrealized gains or losses in any quarter.

The operating improvement was uneven. BNSF earnings increased 6.3% to $1.56B, Berkshire Hathaway Energy rose 26.9% to $891M, and manufacturing, service and retailing advanced 24.1% to $4.47B. Conversely, insurance-underwriting earnings declined 13.1% to $1.73B, while insurance-investment income fell 9.1% to $3.06B. The quarter was therefore stronger outside insurance even as Berkshire’s two principal insurance earnings streams softened.

The “other” category rose to $1.27B from $32M. Much of that change reflected foreign-exchange movements on non-U.S.-dollar debt: Q2 FY2026 included a $326M gain, versus an $877M loss a year earlier. That favorable $1.20B swing accounts for nearly all of the $1.24B increase in the other category, making the 16.3% operating-earnings growth rate somewhat less repeatable than the headline suggests.

GAAP net earnings increased to $25.67B from $12.37B, and Class B EPS rose to $11.91 from $5.73. Investment gains climbed to $12.68B from $4.97B, including $10.9B of gains related to changes in unrealized appreciation. Berkshire also recorded a $3.76B other-than-temporary impairment of its Kraft Heinz investment. These items demonstrate why reported EPS is a scorekeeping result rather than a dependable measure of quarterly operating performance.

The print supports the central quality argument: Berkshire’s collection of controlled businesses can produce growth even when important insurance lines are moving backward. Rail, energy, and manufacturing, service and retailing generated a combined $6.92B of after-tax earnings, up from $5.77B a year earlier. That 20.0% combined increase provided genuine operating support beneath the more volatile investment result.

The counterpoint is that insurance did not contribute to the acceleration. Underwriting and investment income together declined to $4.79B from $5.36B. Insurance float still increased by approximately $1.1B from year-end to $177.5B, but float growth does not guarantee higher near-term insurance earnings. Underwriting profitability and the yield earned on invested funds remain the relevant tests.

Capital allocation became more active. Berkshire repurchased approximately $4.5B of its shares during Q2 and about $4.8B in the first half. Average equivalent Class B shares declined to 2.155B from 2.157B a year earlier, a reduction of only about 0.1%. The purchases are directionally positive for per-share value, but the disclosed share-count change is too small to carry the thesis by itself.

The quarter consequently strengthens the operating-diversification case without resolving the valuation question. Growth from controlled businesses was solid, and repurchases resumed at a meaningful dollar level. However, the insurance decline and the currency contribution prevent us from treating the entire increase in operating earnings as a new sustainable run rate.

We value Berkshire using book value per Class B share because conventional P/E, EV/EBITDA, free-cash-flow yield, gross margin, and ROIC are either not disclosed on a comparable basis or are not meaningful for this financial conglomerate. Supplied shareholders’ equity was $747.91B, and the release reported 1,431,693 Class A equivalent shares outstanding at June 30, 2026. That implies book value of approximately $348 per Class B share, using the disclosed 1,500-to-one Class B conversion ratio.

Our base case applies a 1.55-times price-to-book multiple, producing fair value of approximately $540 per Class B share. This multiple is an explicit assumption rather than company guidance. It reflects Berkshire’s profitable operating subsidiaries, insurance float, conservative net liquidity position in the supplied table, and capital-allocation flexibility, offset by earnings volatility, insurance cyclicality, and dependence on execution across a sprawling portfolio.

The bear case applies 1.20 times book value for fair value of $418, assuming insurance earnings weaken further, non-insurance growth normalizes, and the market assigns less value to capital allocation. The bull case applies 1.90 times book value for fair value of $662, assuming controlled-business earnings continue to expand, underwriting recovers, and buybacks compound book value per share. The quarter does not justify building investment gains or the favorable currency swing into normalized earnings.

At the current $507 price, Berkshire trades at approximately 1.46 times the supplied book value and offers 6.5% upside to the $540 base case. Under SageNoodle’s valuation rule, that is Fairly Valued because upside is below 15%. With no prior coverage, this is an inaugural fair value rather than an increase after the print.

The constructive interpretation would be wrong if the decline in insurance earnings marks more than quarterly variability. Underwriting profit fell despite modest float growth, and investment income also declined. Continued weakness in both would remove an important source of internally generated capital and challenge the premium assigned to book value.

A second risk is extrapolating growth that came from temporary factors. The $1.20B favorable year-over-year foreign-exchange swing explains much of the increase in the other category. If currency effects reverse while rail, energy, and manufacturing growth cool, consolidated operating earnings could flatten even without a severe deterioration in the businesses.

Investment marks remain the largest source of headline noise. Berkshire itself cautions that investment gains or losses in a given quarter can make net earnings per share extremely misleading. A decline in equity markets could reverse the Q2 unrealized gains, reduce reported book value, and compress the multiple simultaneously.

Finally, buybacks create value only when shares are acquired below intrinsic value. The company spent approximately $4.5B on repurchases during the quarter, but at the current market price our estimated discount is modest. More aggressive repurchases near or above fair value would weaken, rather than strengthen, the capital-allocation case.