Hard hits for Warren Buffett: Two significant factors behind Berkshire Hathaway's diminished profits
In the second quarter of 2025, Berkshire Hathaway experienced a substantial 59% decline in net income, primarily due to a $5 billion pre-tax impairment loss on its investment in Kraft Heinz and challenges in its manufacturing segment.
The Kraft Heinz write-down, amounting to $3.76 billion after taxes, was a recognition that the investment's fair value had fallen significantly below its carrying value. This is the second write-down for Berkshire's 27.4% stake in Kraft Heinz, following a $3 billion dip in 2019.
The manufacturing segment, which includes Fruit of the Loom, Jazwares, and Brooks Sports, posted a 5.1% revenue decline in the second quarter. This decline was attributed to lower volumes, tariffs, and business restructurings. The uncertainty surrounding trade policies, including tariffs, was a significant factor in these revenue losses.
The quarterly operating profit of Berkshire Hathaway also took a hit, with a 4% year-over-year drop primarily due to weaker insurance underwriting results and the challenges in the manufacturing segment.
While the energy and railway divisions reported profit increases, these gains were insufficient to offset the negative impacts from insurance underwriting and manufacturing. The overall weaker consumer business results and economic uncertainty also impacted sales volumes.
Warren Buffett, Berkshire Hathaway's CEO, had previously acknowledged that the company overpaid in the 2015 merger that created Kraft Heinz. The recent write-down is a reflection of this overvaluation.
In a separate development, Buffett donated $6 billion worth of Berkshire Hathaway shares and has been a net seller of stocks for 10 straight quarters.
The tariffs, which came into effect earlier this week for many countries, have been a source of concern for businesses worldwide. In April, US President Donald Trump announced sweeping reciprocal tariffs against nearly all imports from more than 180 countries. These tariffs have disrupted orders and shipments for many companies, including Berkshire Hathaway.
Despite the challenges, Berkshire Hathaway maintains a large cash reserve amid uncertain market conditions, demonstrating its cautious investment approach. The broader economic factors, such as global trade tensions, have added to operational pressures.
In conclusion, the main contributors to Berkshire Hathaway’s earnings decline were the Kraft Heinz impairment, lower insurance underwriting income, manufacturing segment revenue declines, overall weaker consumer business results, and economic uncertainty impacting sales volumes. These combined factors explain the year-over-year decline in operating and net earnings for Berkshire Hathaway in the second quarter of 2025.
- The decline in Berkshire Hathaway's net income was partly due to the fall in the fair value of its Kraft Heinz investment, which led to a significant write-down, following two consecutive years of losses.
- The manufacturing segment, a part of Berkshire Hathaway's business, faced a 5.1% revenue decline due to lower volumes, tariffs, and restructurings, causing concern for the overall business performance.
- Investors in the stock market watched as Warren Buffett, Berkshire Hathaway's CEO, donated $6 billion worth of shares and continued to sell stocks in the previous ten quarters, shifting away from the traditional investment approach.
- As the economy faces ongoing global trade tensions, many companies, including Berkshire Hathaway, are grappling with operational pressures and unaided by the increasing tariffs affecting their sales volumes and supply chains.
