Buffett’s Berkshire slumps on $3.8 bn Kraft Heinz loss, sits tight as tariffs loom

Warren Buffett’s Berkshire Hathaway took a staggering $3.76 billion after-tax write-down on its Kraft Heinz stake in the second quarter, a signal that one of its largest investments has fallen significantly short of expectations. As reported by Reuters, the write-down slashed Berkshire’s overall net income by 59 per cent, while operating profits also declined, reflecting growing concerns over market valuations, global trade uncertainties, and lacklustre performance across key businesses.

A tough quarter for Buffett

Berkshire reported second-quarter operating income of $11.16 billion, down from $11.6 billion a year ago. Net income, which includes unrealised gains and losses on Berkshire’s vast stock portfolio tumbled to $12.37 billion from $30.35 billion in the same period last year. Revenue fell 1 per cent to $92.52 billion, weighed down by weak insurance premiums and foreign exchange losses of $877 million due to a weaker US dollar.

The most notable hit came from Kraft Heinz, in which Berkshire holds a 27.4 per cent stake. The food giant recently announced it would explore strategic alternatives, including a possible breakup, after years of lagging consumer interest and shifting demand toward healthier and private-label options. Berkshire said it had carried its Kraft Heinz stake at above-market value, but changing market conditions, economic uncertainties, and longer-term intentions to remain an investor made the valuation gap “other-than-temporary”. As per Reuters, this marks the second major Kraft Heinz writedown by Berkshire, following a $3 billion markdown in 2019. Buffett had previously admitted to overpaying in the 2015 merger between Kraft Foods and H.J. Heinz, calling it one of his major investment missteps.

Cash pile swells, stock buying stalls

Despite the earnings drag, Berkshire’s cash hoard grew to $344.1 billion, just shy of its all-time high. According to Reuters, the company once again sold more stocks than it bought, for an 11th straight quarter suggesting that Buffett and his team view current market valuations as unattractive.

Buffett has not repurchased Berkshire stock since May 2024, signalling further caution even as US and global equities test record highs. Analysts cited by Reuters say President Trump’s escalating tariff regime, particularly on consumer goods and critical imports has likely raised the bar for new investments.

“Buffett definitely views the market as overvalued, and will sit back and wait for something to come to him,” said Kyle Sanders, an analyst at Edward Jones, as quoted by Reuters.

Mixed signals from operating units

Berkshire’s vast operating empire also offered a mixed performance. The group’s insurance underwriting profits fell 12 per cent, dragged down by weaker results in reinsurance and smaller carriers. However, Geico, its flagship auto insurer, saw a modest 2 per cent increase in pre-tax underwriting profit, though analysts warned that Trump’s 25 per cent tariffs on Chinese parts could raise future claims costs.

The company’s rail and utilities segments fared better. Railroad operator BNSF posted a 19 per cent profit increase due to lower fuel expenses, despite flat volumes. Meanwhile, Berkshire Hathaway Energy saw earnings rise 7 per cent, even as the company flagged uncertainty over Trump’s One Big Beautiful Bill Act, which could disrupt the economics of renewables, grid storage, and transmission investment.

Post-Buffett era jitters weigh on stock

Shares of Berkshire have dropped over 12 per cent since Buffett announced on May 3 that he would step down as CEO at year-end. Vice Chairman Greg Abel, 63, is set to take over, while Buffett remains chairman. But as per Reuters, the company is already feeling the weight of the so-called “Buffett premium” beginning to erode, with the stock underperforming the S&P 500 by 22 percentage points in that time.

“Berkshire and the economy are both at inflection points,” said Cathy Seifert, analyst at CFRA Research, speaking to Reuters. “The combination of mediocre results, a lack of buybacks, and succession uncertainty is not what the market wants to see.”

Waiting for a better pitch

For now, Buffett appears content to sit on the sidelines with his record cash stockpile, avoiding new bets in a market clouded by tariff uncertainty, inflation pressures, and geopolitical volatility. The 93-year-old billionaire, who built Berkshire into a $1 trillion empire, remains cautious and with the US economy flashing mixed signals, investors may need to wait longer for his next “elephant-sized” acquisition.

(With inputs from the agencies)