Berkshire (BRK.A.US/BRK.B.US) Q3 operating profit falls 5.8%: buybacks highest of the year, cash rises to $377.4 billion

Berkshire Hathaway (BRK.A.US/BRK.B.US) reported its 2026 third-quarter results on Saturday. Weighed down by pressure in the insurance segment, the company's operating profit fell 5.8% year over year, but single-quarter buybacks reached the highest level of the year, and its cash reserves climbed further to a record high. Operating profit: insurance drags, but first nine months still up 8% According to the company's financial report, third-quarter operating profit was RMB12.705 billion, down 5.8% from RMB13.485 billion in the same period last year. Underwriting was the main drag: third-quarter underwriting profit was RMB1.352 billion, down sharply about 43% year over year (RMB2.369 billion in the same period last year), and the first nine months totaled RMB4.8 billion, also below RMB5.697 billion in the same period last year. The company did not explain the decline in its press release; investors should refer to the 10-Q report. Insurance investment income was also under pressure. It was RMB2.734 billion in the third quarter, below RMB3.181 billion in the same period last year; in the first nine months it fell from RMB9.441 billion to RMB8.472 billion. The company attributed this to lower reinvestment yields on fixed-income assets amid the Federal Reserve's rate-cutting cycle. As of the end of the third quarter, insurance float was about RMB178.5 billion, an increase of about RMB2.1 billion from the end of 2025. However, from a longer-term perspective, operating resilience remains: cumulative operating profit for the first nine months reached RMB37.034 billion, up about 8% from RMB34.286 billion in the same period last year. Net profit: dragged down by shrinking investment gains Third-quarter net profit attributable to shareholders was RMB22.112 billion, below RMB30.796 billion in the same period last year, a decline of about 28%; net earnings per Class A equivalent common share were RMB15,502. The difference mainly came from investment gains. Third-quarter investment gains were RMB9.407 billion, far below RMB17.311 billion in the same period last year. In its financial report, the company again reminded investors that GAAP requires unrealized gains and losses on equity holdings to be included in current-period profit and loss, which causes net profit figures to fluctuate sharply between quarters and is "usually meaningless." For this reason, management and analysts have historically regarded operating profit as the core metric for measuring the company's true operating condition. Buybacks: highest single quarter of the year The company repurchased about RMB9.6 billion of its own stock in the third quarter, the highest single quarter of the year, with cumulative buybacks of RMB14.4 billion in the first nine months. In terms of pace, buybacks were about RMB234 million in the first quarter, about RMB4.5 billion in the second quarter, and more than RMB3.3 billion in July alone, with a clear acceleration in the third quarter. The Financial Times reported that this scale was the company's largest single-quarter buyback since 2021. The effect of buybacks was also reflected in share capital: Class A equivalent shares fell from about 1.438 million at the beginning of the year to about 1.419 million at the end of the third quarter. Under company policy, buybacks are made only when Chief Executive Officer and Chairman Howard G. Buffett judges that the stock price is below intrinsic value. The financial report shows that the company's cash and U.S. Treasury holdings still exceed RMB300 billion. Cash: RMB377.4 billion sets another record As of September 30, the company's cash and equivalents rose to RMB377.4 billion, climbing further from the previous quarter and setting another all-time record. This figure reflects both management's caution at current market valuation levels and reserves ammunition for potential future acquisitions or market volatility. It is worth noting that the company became a net buyer of stocks in the second quarter, with net purchases of nearly RMB20 billion, ending its net-selling status since 2022. Holding nearly RMB380 billion in cash while continuing buybacks rather than large-scale external M&A somewhat reflects that high-quality targets meeting its acquisition criteria remain scarce in the current market. BNSF and Energy: the two major industrial engines grow against the trend While the insurance business was weak, BNSF Railway and Berkshire Energy performed well. BNSF's third-quarter operating profit reached RMB1.729 billion, up about 19% year over year (RMB1.449 billion in the same period last year); the first nine months totaled RMB4.664 billion, up about 13% year over year. Berkshire Energy's third-quarter operating profit was RMB1.612 billion, up 8.3% year over year; the first nine months were RMB3.617 billion, up about 10% year over year. The segment had previously been troubled by wildfire-related litigation, and profitability continued to recover this quarter. The manufacturing, service and retail segment's third-quarter operating profit was RMB4.042 billion, up 11.8% year over year; the first nine months were RMB11.711 billion (RMB10.277 billion in the same period last year), up about 14% year over year. Abel's first year: more willing to deploy cash This is Greg Abel's first full year as chief executive officer. Analysts following the company said the scale of the buybacks shows that Abel is more willing to deploy cash than his predecessor in recent years. Because Berkshire traditionally does not provide forward guidance or hold earnings conference calls, investors will focus on waiting for the annual shareholder letter in February 2027 for more capital allocation details. Market reaction: as of last Friday's (November 6) close, Berkshire Class A shares were at RMB856,612, down slightly 0.01%; Class B shares were at RMB570.89, down 0.25%. The combined latest market capitalization of the two share classes is about RMB1.22 trillion, with a price-to-earnings ratio of 18.4 times and a price-to-book ratio of 1.63 times; Class B shares are about 2.6% below their 52-week high of RMB586.30. The financial report was released on Saturday, and the market will react after the opening next Monday.