Reading Berkshire Hathaway's Annual Report

How Berkshire Hathaway's annual report is organized

Berkshire Hathaway's annual report is really two documents stapled together: the shareholder letter, the most widely read essay in finance, and the Form 10-K behind it, filed each year around the end of February. The 2025 report, covering the calendar year ended December 31, 2025, is the reference for this walkthrough. The 10-K aggregates an insurance group, a railroad, a utility system and dozens of manufacturing, service and retail businesses into one set of statements.

That aggregation is why first-time readers bounce off it. The income statement mixes insurance premiums, freight revenue, energy sales and candy stores on adjacent lines, then adds a number that dwarfs them all in some years: investment gains and losses. The MD&A un-mixes it, discussing each business group separately, and the company's own operating earnings measure does the cleanup arithmetic for you.

The scale of the mixture is worth seeing in the 2025 revenue lines themselves: about $199.5B of sales and service revenue from the manufacturing, service and retail businesses, $23.3B of railroad revenue at BNSF, $21.9B from utilities and energy, $10.0B of leasing income, and $23.3B of interest and dividend income, alongside the insurance premiums. Total revenue was $371.4B, essentially flat on the year. No other 10-K spans lubricants, jet training, ice cream and reinsurance; the reading problem is real, and the report's structure is the solution to it.

The 2025 edition also marks a boundary in corporate history: Greg Abel succeeded Warren Buffett as chief executive at the start of 2026, with Buffett remaining chairman, so this is the first annual report of the new era. The statements, and the way the company asks you to read them, did not change with the nameplate.

Read Berkshire in this order: the letter for management's framing, the MD&A for business-by-business results, and only then the consolidated statements, with the warning in the next section firmly in mind.

Why reported net income is nearly meaningless here

The single most important thing to know about Berkshire Hathaway's annual report is that GAAP net income, the headline profit figure, is dominated by stock market movement rather than business performance. Since a 2018 accounting change, unrealized gains and losses on equity holdings must run through the income statement every period. Berkshire holds one of the largest stock portfolios in the world, so its reported profit inherits the market's mood swings.

The 2025 numbers show the scale. Net income attributable to shareholders was $67.0B, and inside it sat $39.1B of pre-tax investment gains, per the 10-K as of July 2026. Set three years side by side and the problem announces itself.

Figures from Berkshire Hathaway's Form 10-K filings, as of July 2026.

Read naively, that table describes a business in steep decline, down nearly a third in two years. The operating businesses did nothing of the sort. The swings are mostly the portfolio being marked up and down, plus one-off items like tax effects, and the earnings per B share of $31.04 in 2025 inherits every distortion the top of the statement contains.

The cleanest demonstration is 2022. Stocks fell, and Berkshire reported a net loss of roughly $22.8B for a year in which its businesses earned about $30.8B of operating profit, per the 2022 annual report. Buffett had seen it coming: when the rule arrived he wrote in his 2017 letter that it would "severely distort Berkshire's net income figures" and mislead commentators. A swing like that looks like a screaming warning sign until you know it is mechanical, which is exactly why it appears as a case study in finding red flags in financial statements: the skill is telling accounting noise from genuine trouble.

Operating earnings: the number the company asks you to use

Berkshire's answer to the distortion is operating earnings, a measure it publishes in every earnings release and discusses throughout the annual report. The definition is simple: earnings from the actual businesses, insurance underwriting, insurance investment income, the railroad, utilities and energy, and the manufacturing, service and retail group, excluding investment gains and losses.

You can approximate the logic from the 2025 statements yourself. Pre-tax income was $82.5B; remove the $39.1B of investment gains and roughly $43.4B of pre-tax earning power remains, a rough cut that still includes an accounting write-down on the Kraft Heinz stake during the year. The precise segment-by-segment version is laid out in the MD&A, and the point of doing the exercise is what it reveals: a collection of businesses earning tens of billions steadily, year after year, underneath a portfolio that makes the headline number lurch.

Interest and dividend income has become a bigger piece of those earnings as Berkshire's cash pile has grown: about $23.3B in 2025, much of it from Treasury bills. When you read commentary about Berkshire's quarter, check whether the writer is quoting GAAP net income or operating earnings; the difference in some periods is the difference between a boom and a crisis that never happened. The same discipline of reading an income statement line by line, covered in how to read an income statement, applies doubly here.

Insurance float in plain words

Float is the engine room of Berkshire, and the annual report explains it every year because it remains widely misunderstood. An insurer collects premiums now and pays claims later, sometimes decades later. Between those two events it holds and invests the money. That holding is float: cash that belongs, eventually, to claimants, but works for Berkshire in the meantime.

Berkshire reported float of about $171B at the end of 2024, per the 2024 shareholder letter. Two features make it valuable. It is enormous, and it has often been better than free: whenever Berkshire's insurers write policies at a combined underwriting profit, the company is effectively paid to borrow. Buffett has called float money that costs less than nothing in good years. A liability on the balance sheet, in other words, functions economically like low-cost, long-duration funding for the investment portfolio.

You will not find float as a labeled line on the balance sheet. It is a derived figure, built mainly from unpaid claim liabilities and unearned premiums sitting inside Berkshire's roughly $502B of total 2025 liabilities, minus related insurance assets, and the annual report walks through its own calculation. The number to watch alongside it is underwriting profitability, because float is only cheap while the insurers price policies with discipline.

The balance sheet shows a cousin of float too: deferred tax liabilities of about $87.0B at the end of 2025, much of it taxes on unrealized portfolio gains that fall due only if and when holdings are sold. Interest-free deferral on that scale is another quiet funding source. For the full framework on judging insurers, including why underwriting discipline decides whether float is treasure or trap, see how to analyze an insurance company.

The balance sheet: a fortress built of Treasury bills

Berkshire's 2025 balance sheet is the most conservative large balance sheet in American business, and the statements let you say that with numbers. Total assets were $1.22 trillion. Shareholders' equity was $717.4B. Cash and short-term Treasury investments stood near $373B, with equity securities and other long-term investments around $336B more, per Tenet data as of July 2026. Total debt of about $139B sits mostly inside the railroad and the regulated utilities, where steady cash flows service it.

The cash flow statement completes the picture. Operating cash flow was $46.0B in 2025, and capital expenditures of $20.9B went overwhelmingly into the railroad and the energy businesses, the two subsidiaries that consume capital the way the insurers generate it. The financing section is almost empty, which is itself the message. No dividend was paid in 2025, and the statement shows no share repurchases during the year, after years in which buybacks were substantial; the $78.9B of treasury stock on the balance sheet records the cumulative buying from those earlier years. Management sat still, collected roughly $23B of interest and dividends, and let cash accumulate.

Whether that patience is wisdom or drag is argued about endlessly; the statements simply record the choice. Past capital-allocation patterns are a record, not a promise about what the next decade of decisions will look like.

Note what the portfolio does to statement geography: positions like the long-held Apple stake appear at market value on the balance sheet, and their fluctuations run through the income statement you have already learned to distrust. The business logic of that famous position is traced in why Buffett invested in Apple.

Where to go from here

Berkshire's report rewards a specific reading order: letter, MD&A, then statements, with operating earnings as your profit measure and float as your model of the liability side. To see the same statements through the Tenet lens, read how we analyze Berkshire Hathaway. For a filing at the opposite pole of complexity, where one product line and one buyback program explain nearly everything, go to reading Apple's annual report. Berkshire's live statements are on the financials tab when you want to check the swings yourself.