On February 22, 2025, Berkshire Hathaway reported $88.995 billion in 2024 net earnings in its full-year results. It also reported $47.437 billion in operating earnings. Its annual report presents both figures. Berkshire’s claim was that it earned nearly $89 billion under generally accepted accounting principles, not that its operating businesses produced that entire amount.
The record shows a more useful distinction. Operating earnings supplied 53.3% of net earnings. Investment gains supplied the other 46.7%. More importantly, the two measures moved in opposite directions from 2023.
What makes up the $89 billion?
Berkshire’s February 2025 earnings release provides the reconciliation. For 2024, operating earnings of $47.437 billion plus investment gains of $41.558 billion equal net earnings attributable to Berkshire shareholders of $88.995 billion. These are after-tax figures. Mixing them with pretax investment gains elsewhere in the annual report would produce the wrong answer.
The comparable 2023 figures were $37.350 billion in operating earnings and $58.873 billion in investment gains. Together, they produced $96.223 billion in net earnings.
Consequently, Berkshire’s net earnings fell $7.228 billion, or 7.5%, in 2024. Its operating earnings rose $10.087 billion, or 27.0%. The difference was a $17.315 billion decline in investment gains, which more than offset the operating improvement.
A reader using the headline alone would see falling profit. A reader using the operating reconciliation would see substantial earnings growth. Both calculations are correct. They answer different questions.
Why do unsold shares affect profit?
The accounting rule matters. The Financial Accounting Standards Board’s Accounting Standards Update 2016-01 generally requires equity investments within its scope to be measured at fair value, with changes recognized in net income. Berkshire therefore records changes in the market value of qualifying stock holdings even when it has not sold them.
Those gains are not cash receipts. They are changes in the recorded value of assets Berkshire owns. A subsequent market decline can reverse them through the same income statement.
Buffett warned shareholders about this before Berkshire’s 2018 adoption of the rule. In his 2017 shareholder letter, he said the requirement would introduce large fluctuations in reported bottom-line earnings. The 2018 annual report then recorded approximately $4.0 billion in net earnings alongside $24.8 billion in operating earnings.
This is not a special accounting permission Berkshire invented. The rule puts market movements into reported profit. Berkshire’s operating presentation separates those movements from the measure management uses to assess its businesses.
Were all the investment gains unrealized?
No. The $41.558 billion is an investment-gains figure, not an unrealized-gains figure. The 2024 annual report’s investment disclosures distinguish gains and losses on securities sold from changes in unrealized gains and losses. The operating reconciliation removes the combined investment result.
That distinction prevents two errors. Calling the entire amount cash profit is wrong because valuation changes enter earnings without a sale. Calling the entire amount unrealized is also wrong because the investment result includes transactions in securities.
A sale introduces another accounting wrinkle. Under fair-value accounting, appreciation recognized in earlier reporting periods does not become new earnings merely because Berkshire sells the shares. The cumulative gain over original purchase cost is not the same as the gain attributable to the current reporting period.
Sale proceeds are different again. They include the recovery of Berkshire’s investment, not just profit. Adding proceeds to operating earnings would count returned capital as income.
The clean reconciliation is therefore $47.437 billion of operating earnings plus $41.558 billion of investment gains. It is not operating earnings plus $41.558 billion of cash collected, or plus $41.558 billion of gains on unsold shares.
What does Berkshire call operating?
Berkshire’s definition includes more than railroads, utilities, factories and shops. In 2024, insurance investment income contributed $13.670 billion to operating earnings, up from $9.567 billion in 2023. Interest and dividends belong in this category even though changes in securities’ market values are excluded.
That treatment reflects the economics of insurance. Berkshire’s insurers hold investments while carrying obligations to policyholders. The income those investments produce is part of the insurance operation. Removing every dollar connected to an investment portfolio would remove an important source of operating income.
Insurance underwriting contributed another $9.020 billion in 2024, compared with $5.428 billion in 2023. Together, underwriting and insurance investment income supplied $22.690 billion, nearly half of Berkshire’s operating earnings.
There is one important boundary. Operating earnings are Berkshire’s non-GAAP profit measure, not cash flow or cash available for distribution. The SEC’s guidance requires appropriate presentation and reconciliation of non-GAAP measures; it does not make management’s preferred measure a substitute for the financial statements. The 53.3% answer describes Berkshire’s earnings classification, not the proportion of profit deposited into a bank account.
Which businesses improved?
The 2024 operating table makes the source of growth unusually clear. Insurance underwriting improved by $3.592 billion. Insurance investment income improved by $4.103 billion. Their combined $7.695 billion increase supplied approximately 76.3% of the total increase in operating earnings.
The rest of Berkshire did not move uniformly upward. BNSF earned $5.031 billion in 2024, down from $5.087 billion in 2023. The manufacturing, service and retailing group earned $13.072 billion, down from $13.364 billion.
Berkshire Hathaway Energy moved the other way. Its operating earnings rose to $3.730 billion from $2.331 billion. The category labeled “other” rose to $2.914 billion from $1.573 billion.
These figures support a narrower conclusion than “Berkshire’s businesses grew 27%.” Aggregate operating earnings grew by that amount. Insurance supplied most of the increase, while railroad earnings and the combined manufacturing, service and retailing result declined.
Did the quarters tell the same story?
Berkshire’s quarterly reports show how much the investment result changes the apparent composition of profit. In the first quarter of 2024, operating earnings were $11.222 billion against net earnings of $12.702 billion. Operations accounted for most of the reported result.
In the second quarter, investment gains of $18.750 billion exceeded operating earnings of $11.598 billion. In the third quarter, investment gains of $16.161 billion again exceeded operating earnings, which were $10.090 billion.
The February 2025 release reported fourth-quarter operating earnings of $14.527 billion and investment gains of $5.167 billion. Operations again supplied most of net earnings.
The relationship changed repeatedly within the same year. Net earnings combined business results with investment results in every quarter, but the weights shifted substantially.
What is the verdict?
By Berkshire’s operating measure, its businesses earned $47.437 billion in 2024, or 53.3% of reported net earnings. The other $41.558 billion was investment gains, not a separate measure of cash generated or exclusively unrealized appreciation. The $88.995 billion headline was valid accounting, but it was a poor stand-alone description of operating performance. Berkshire’s net earnings fell in 2024 while its operating earnings rose, with insurance supplying most of the improvement.
