Berkshire Hathaway (BRK.A) Q2 FY2026: Net Income +107%, Liquidity $365.5B Down $32B From Record; Abel Era Resumes Buybacks, M&A
Berkshire Hathaway posted net income of $25.667 billion in the second quarter of 2026, up 107.5% from $12.370 billion a year earlier (SEC 10-Q filing, as of June 30, 2026; all figures from the same source unless noted). An unrealized gain of $16.077 billion (pre-tax) on equity securities drove the headline figure, but operating earnings — which exclude investment gains and losses — rose 16.3% year over year to $12.983 billion. The net income doubling came from portfolio revaluation, not core operations.
Liquidity contracted. Cash and cash equivalents (excluding restricted cash) fell from $51.877 billion at year-end to $40.609 billion, while short-term U.S. Treasury Bill investments edged up from $321.4 billion to $324.9 billion, leaving combined cash-plus-T-bill liquidity down 2.1% from $373.3 billion at year-end to $365.5 billion. The critical context: $365.5 billion is not a record — Berkshire's combined liquidity hit an all-time high of $397.4 billion as of March 31, 2026, and shed $32 billion in a single quarter. OxyChem's $9.4 billion cash acquisition in January, $4.44 billion of share repurchases in the first half, and $11.6 billion of net equity purchases consumed the difference. The $6.8 billion acquisition of Taylor Morrison, signed May 31 and completed July 24, will appear on the balance sheet in Q3.
One more critical point: this quarter is the first full quarter whose decisions reflect CEO Greg Abel's leadership — Buffett remains executive chairman — and Abel ended 14 consecutive quarters of net equity selling, returning to net buying for the first time in roughly three years. Share buybacks also resumed.
- Consolidated Balance Sheet Analysis
1-1. Key Asset and Liability Items
| Item | Dec. 31, 2025 ($100M) | Jun. 30, 2026 ($100M) | Change | Commentary |
|------|---:|---:|---:|------|
| Cash & cash equivalents + restricted cash | 525.7 | 413.6 | -21.3% | Declined due to OxyChem acquisition, buybacks, and net equity purchases |
| Short-term U.S. Treasury investments (T-Bills) | 3,214.3 | 3,249.1 | +1.1% | 25.7% of total assets — effectively cash-equivalent; partially offsets cash decline |
| Cash (excl. restricted) + T-Bills combined | 3,733.1 | 3,655.2 | -2.1% | Down $32B from the all-time high of $397.4B as of March 31, 2026 |
| Equity securities | 2,977.8 | 3,237.8 | +8.7% | Top 5 holdings (Alphabet, Amex, Apple, BofA, Coca-Cola) account for 66% |
| Receivables (premiums + trade) | 385.6 | 435.0 | +12.8% | Revenue growth plus OxyChem consolidation |
| Inventories | 244.2 | 265.8 | +8.8% | Raw material and resale inventory increase |
| Property, plant & equipment (net) | 2,166.3 | 2,252.2 | +4.0% | OxyChem PP&E of $7.0B newly consolidated |
| Goodwill | 830.7 | 831.7 | +0.1% | $0.352B new additions; no impairment |
| Total assets | 12,221.8 | 12,630.7 | +3.3% | — |
In-Depth Analysis
The anatomy of the cash decline: Cash (including restricted) fell $11.2 billion over six months. The decisive factor was a reversal in investing cash flows — from a net inflow of $33.0 billion in the first half of 2025 to a net outflow of $28.6 billion in the same period of 2026. Net equity purchases of $11.6 billion and the OxyChem acquisition of $9.7 billion drove the swing.
Surge in PP&E (Insurance & Other segment): Rose 23.6% from $31.89 billion to $39.41 billion, almost entirely from $7.0 billion of OxyChem PP&E recognized at acquisition. Depreciation in that segment also rose 25.4%, from $1.57 billion to $1.97 billion over the six-month period.
The $26.0 billion increase in equity securities is mostly new buying, not appreciation. Cost basis expanded from $85.39 billion to $106.52 billion — a $21.13 billion increase — while unrealized gains grew only $4.87 billion, from $212.39 billion to $217.26 billion. About 81% of the 8.7% increase reflects net purchases, not price appreciation. Unrealized gains of $217.26 billion represent 67.1% of the portfolio's fair value.
1-2. Liability Structure — Financial Debt vs. Operating Liabilities
Financial Debt (borrowings and notes)
Insurance & Other segment borrowings: $43.30 billion ($45.76 billion at year-end, -5.4%). Approximately $3.3 billion in maturities repaid during the six months; ¥272.3 billion of Japanese yen-denominated notes (approximately $1.7 billion, weighted average rate 2.4%) newly issued in April.
Railroad, Utilities & Energy borrowings: $85.297 billion ($83.32 billion at year-end, +2.4%). BHE subsidiaries issued $4.6 billion in new debt (weighted average rate 5.8%) to fund capital expenditures.
Combined: $128.599 billion — 10.2% of total assets, maintaining low leverage.
Operating Liabilities (accounts payable and insurance reserves)
Losses and loss adjustment expenses (direct): $122.88 billion (+1.8%). Stable with no material catastrophe events.
Retroactive reinsurance liabilities: $29.98 billion (-3.4%). Natural run-off trajectory.
Unearned premiums: $32.75 billion (+4.5%). Reflects premium growth at GEICO and other insurers.
Accounts payable and accrued liabilities: $41.42 billion (+9.0%).
Financial liabilities are dwarfed by operating liabilities, primarily insurance reserves. These represent essentially interest-free float — the low-cost funding structure Berkshire has deployed for decades, and it remains intact.
1-3. Capital Structure
Paid-in capital (common stock + additional paid-in): $35.62 billion (minimal change)
Retained earnings: $763.19 billion → $798.96 billion (+4.7%) — $35.77 billion of Berkshire-attributable net income accumulated over six months
Treasury stock (at cost): -$78.94 billion → -$83.70 billion ($4.76 billion increase in carrying amount)
Total Berkshire shareholders' equity: $747.91 billion (+4.2%)
Retained earnings are 22.4 times paid-in capital. The capital base is almost entirely accumulated earnings — the product of 60 years of reinvestment, with only a single dividend (10 cents per share in 1967) paid in the company's history.
- Consolidated Income Statement Analysis
2-1. Key Revenue Metrics (Q2)
| Item | Q2 2025 ($100M) | Q2 2026 ($100M) | Change |
|------|---:|---:|---:|
| Revenues | 925.15 | 1,018.08 | +10.0% |
| Pre-tax earnings (excl. equity method, incl. investment gains/losses) | 194.95 | 318.15 | +63.2% |
| └ Pre-tax earnings excl. investment gains/losses | 131.31 | 157.38 | +19.9% |
| Pre-tax earnings | 147.50 | 320.63 | +117.4% |
| Operating earnings (company-reported basis) | 111.6 | 129.83 | +16.3% |
| Net earnings attributable to Berkshire | 123.70 | 256.67 | +107.5% |
| Net profit margin | 13.4% | 25.2% | +11.8pp |
| Class A EPS | $8,601 | $17,868 | +107.7% |
| Effective tax rate | 15.5% | 19.6% | +4.1pp |
In-Depth Analysis
Revenue growth was led by sales and services (+15.4%) and railroad (+14.6%). BNSF rail revenues climbed from $5.72 billion to $6.55 billion, signaling a recovery in freight volumes.
Composition of the $16.08 billion investment gain: $15.64 billion in unrealized appreciation on holdings at quarter-end and $0.43 billion in realized gains on securities sold during the period (Note 6). In other words, 97% of the gain is unrealized and carries no cash-flow impact. Separately, taxable realized gains on a tax basis were $2.3 billion in Q2 — a figure derived from a different cost basis than the accounting gain, and therefore not directly comparable.
SG&A expenses fell 15.2%, from $7.93 billion to $6.72 billion, almost entirely because of a $1.62 billion swing in foreign-currency effects on foreign-currency-denominated borrowings — from a $1.2 billion loss in Q2 2025 to a $0.42 billion gain in Q2 2026. Stripping out the currency effect, underlying SG&A rose 6.1% from $6.73 billion to $7.14 billion.
Equity method income reversed: from -$4.75 billion (Kraft Heinz ~$5.0 billion impairment) in Q2 2025 to +$0.25 billion in Q2 2026. The prior-year impairment event has dropped out of the base.
Effective tax rate rose from 15.5% to 19.6%. A higher proportion of unrealized gains in pre-tax income diluted tax-reducing items such as the dividends-received deduction. Without the rate increase, net income would have been higher.
2-2. Fixed vs. Variable Cost Analysis
Variable costs (revenue-linked)
Cost of sales and services: $45.95 billion (prior year $39.62 billion, +16.0%) — cost growth of 16.0% slightly outpaced sales-and-services revenue growth of 15.4%. Cost ratio deteriorated marginally from 79.8% to 80.2%.
Insurance losses and loss adjustment expenses: $14.27 billion (+1.4%) — in line with premium growth of 1.3%.
Cost of leasing: $2.14 billion (+13.5%).
Fixed costs
SG&A: $6.72 billion (post-FX gain adjustment). Core personnel and depreciation costs rose modestly.
Interest expense: $0.32 billion (Insurance/Other) + $1.02 billion (Railroad/Utilities/Energy) = $1.34 billion (+6.5%). Interest on BHE subsidiaries' $4.6 billion of new debt (weighted average 5.8%) will flow through fully in the second half.
Depreciation (six months, PP&E): $5.47 billion (+9.8%) — reflecting OxyChem PP&E addition.
Conclusion: Revenue grew 10% while cost of sales rose 16%, modestly compressing grossmargins. Equity portfolio revaluation more than offset that compression, inflating reported net income twofold. The 16.3% rise in company-reported operating earnings versus the 107.5% jump in net income captures the gap. The headline beat is a revaluation story, not an operating one.
- Cash Flow Statement Analysis (Six-Month Cumulative)
| Item | H1 2025 ($100M) | H1 2026 ($100M) | Change |
|------|---:|---:|---:|
| Operating cash flow | 209.88 | 216.53 | +3.2% |
| Investing cash flow | +329.57 | -286.44 | Reversal |
| Financing cash flow | -11.13 | -41.09 | Larger outflow |
| Period-end cash (incl. restricted) | 1,012.28 | 413.60 | -59.1% |
※ The unusually high H1 2025 period-end cash balance reflects a net T-bill disposal phase during which total cash grew $52.85 billion in that half-year alone. The year-over-year ending-balance comparison reflects different capital-deployment phases, not a deteriorating trend.
In-Depth Analysis
Operating cash flow of $21.653 billion remained stable: Consolidated net income of $35.95 billion was reduced by a $14.47 billion non-cash investment gain adjustment and supplemented by $7.12 billion of depreciation and amortization, $2.62 billion of deferred income taxes, and other working-capital movements. Core cash generation is intact.
The investing reversal is the decisive factor:
Net equity purchases: -$11.6 billion (vs. +$4.5 billion in H1 2025). Purchases of $39.4 billion (prior year $7.1 billion) dwarfed proceeds from sales of $27.8 billion (prior year $11.6 billion). After 14 consecutive quarters of net equity selling, Berkshire turned net buyer for the first time in roughly three years.
Net proceeds from U.S. Treasuries and bonds: +$3.4 billion (vs. +$37.2 billion in H1 2025) — the pace of T-bill liquidation slowed sharply. The $3.5 billion rise in T-bill carrying value despite a net cash inflow is not a contradiction — it reflects $6.12 billion of non-cash discount accretion on zero-coupon T-bills, which lifts carrying value without a corresponding cash inflow.
Business acquisitions: -$9.7 billion (OxyChem) — new M&A activity resumed.
CapEx: -$10.63 billion (vs. -$9.14 billion in H1 2025, +16.3%).
Financing cash outflow of $4.109 billion: Share repurchases of $4.44 billion, compared with zero in H1 2025, drove the shift. Under Berkshire's buyback policy, repurchases may not reduce combined cash and T-bill holdings below $30 billion, so the $365.5 billion liquidity level does not constrain buyback capacity. The decision now rests with CEO Greg Abel, not Buffett.
Free cash flow (FCF) = $21.65 billion − $10.63 billion = $11.02 billion (six-month basis). Annualized, approximately $22 billion — still formidable.
- Five Developments That Demand Attention
① OxyChem Acquisition Closed ($9.4 Billion) — Signals Return to M&A
Closed January 2, 2026 via $9.4 billion cash payment to Occidental Petroleum. Preliminary purchase price allocation: $10.7 billion in assets ($7.0 billion PP&E), $1.3 billion in liabilities — net assets virtually matching the purchase price, resulting in virtually no goodwill (total new goodwill recorded across all H1 acquisitions: $0.352 billion). Occidental retained existing environmental liabilities.
② Taylor Morrison Acquisition Closed July 24 ($6.8 Billion)
U.S. homebuilder acquired for $72.50 per share in cash. Consolidation begins in Q3; because the closing date falls close to the filing date, the company has not yet disclosed preliminary estimates of assets acquired, liabilities assumed, or goodwill. Together with OxyChem, it signals Berkshire's pivot from cash accumulation to active capital deployment.
③ Share Buybacks Resumed — $4.44 Billion in H1 (Carrying Value $4.76 Billion)
Zero in H1 2025; repurchases resumed in H1 2026, concentrated heavily in Q2 at roughly $4.5 billion. Under Berkshire's repurchase policy, the CEO and executive chairman must both agree the repurchase price is below a conservative estimate of intrinsic value — under Abel, that determination has now been made.
④ Kraft Heinz Impairment Risk Persists
As of June 30, the carrying value of Berkshire's Kraft Heinz stake exceeded its fair value by $1.1 billion (12.2% of carrying value). Management reviewed intent to hold, magnitude of decline, and duration, concluding impairment was not required as of June 30. However, the company itself flagged that a change in holding intent could trigger recognition. The precedent is recent: in Q2 2025, the same review concluded the impairment was other-than-temporary, and Berkshire recognized approximately $5.0 billion in charges. The gap between Kraft Heinz's equity-method carrying value and its underlying book value has since narrowed from $5.0 billion to $2.8 billion, following Kraft Heinz's own impairment recognition.
⑤ Deferred Tax Liability of $90.18 Billion — A Latent Cash Call on Any Sale
Rose from $86.96 billion at year-end to $90.18 billion at June 30. A significant portion corresponds to deferred taxes on $217.26 billion of unrealized gains in the equity portfolio. Long-term holding intent means no immediate cash outflow, but any large-scale equity disposition converts deferred taxes into real payments.
- Key Takeaways and Outlook
Positive factors
Pre-tax earnings excluding investment gains rose 19.9%, from $13.131 billion to $15.738 billion. Company-reported operating earnings of $12.983 billion advanced 16.3%, led by BNSF rail revenues (+14.6%) and sales and services revenues (+15.4%).
However, insurance underwriting weakened. Q2 underwriting pre-tax earnings — premiums earned less losses, loss adjustment expenses, life/annuity/health benefits, and underwriting expenses — fell 14.0%, from $2.53 billion to $2.18 billion. Loss costs (+1.4%) and underwriting expenses (+7.5%) both outpaced premium growth (+1.3%).
OxyChem and Taylor Morrison diversify Berkshire into chemicals and U.S. homebuilding, positioning the company for infrastructure and construction-cycle tailwinds.
Resumed buybacks and new M&A signal that Abel's Berkshire has begun unwinding the cash fortress built under Buffett.
Risk factors
Pace of liquidity decline: Combined liquidity fell $32 billion (-8.0%) in a single quarter from the March 31 all-time high of $397.4 billion. At $365.5 billion, the absolute level remains enormous — OxyChem ($9.4 billion) plus Taylor Morrison ($6.8 billion) together represent only 4.4% of that pool, and "constrained acquisition capacity" is not a credible concern. But if the drawdown rate continues, the narrative shifts from "fortress" to "deploying." Note: $12.1 billion of undrawn credit facilities exist, but $10.2 billion belongs to BHE subsidiaries, and Berkshire does not guarantee BHE or BNSF debt, so those facilities must not be aggregated into the parent's standalone liquidity.
Top-5 equity holdings at 66% of portfolio: Alphabet, Amex, Apple, Bank of America, and Coca-Cola represent approximately $213.7 billion — 28.6% of shareholders' equity — making Berkshire's capital base directly sensitive to declines in those names. With most of the Q2 equity increase attributable to new purchases, the average cost basis has risen.
Kraft Heinz impairment risk; BHE subsidiary borrowing costs rising to 5.8% on new issuances, expanding interest expense; effective tax rate increase from 15.5% to 19.6%.
Overall assessment: The "impressive headline numbers" in Q2 were largely a function of equity portfolio revaluation — operating earnings grew only 16.3%. More fundamentally, Berkshire has ended a prolonged holding pattern and begun deploying its cash reserves into equities, acquisitions, and buybacks. Combined liquidity of $365.5 billion is still historically elite, but has already retreated from its March 31 all-time high. Three things to watch: (1) Q3 liquidity after Taylor Morrison consolidation; (2) whether Abel sustains the pace of buybacks and equity buying; (3) Kraft Heinz's year-end impairment determination.
Disclaimer
This report is prepared for informational purposes based on Berkshire Hathaway's Form 10-Q (period ending June 30, 2026) filed with the SEC, and does not constitute investment advice. Comparative figures not directly stated in the 10-Q — including March 31, 2026 liquidity and operating earnings — have been cross-referenced with the company's prior-quarter filings and public disclosures.