The Omaha, Nebraska-based company, which owns companies ranging from insurer Geico to railroad BNSF Railway to sportswear maker Brooks Running, reported a $43.8 billion loss, or $29,754 per class A share equivalent. In the previous year, the company earned $28.1 billion, or $18,488 per share.
Berkshire's operating earnings, excluding some investment results, increased to $9.3 billion from $6.7 billion the previous year. Earnings increased across the board at the company's major divisions, including its railroad, utilities, and energy businesses, as well as its insurance underwriting operations.
Because accounting rules require Berkshire to include unrealized gains and losses from its investment portfolio when reporting net income, CEO Warren Buffett has stated that he prefers to look at operating earnings to gauge the company's performance. When markets fall, as they have this year, they can be a significant drag on Berkshire's earnings, even if its core businesses are performing well.
"We believe that investment and derivative gains and losses...are generally meaningless in understanding our reported quarterly or annual results or evaluating our businesses' economic performance," Berkshire said in a statement accompanying its results.
The S&P 500 has dropped 13% in 2022, as decades of high inflation have forced the Federal Reserve to quickly raise interest rates. Rising freight, labor, and raw material prices have all weighed on businesses, including Berkshire's subsidiaries.
Berkshire's railroad unit, for example, saw a 20% increase in operating costs in the second quarter, owing primarily to a sharp increase in fuel and wage costs.
"In terms of inflation in our own businesses, it's extraordinary how much we've seen," Mr. Buffett said earlier this year at the company's annual shareholder meeting.
Despite rising price pressures and a slowing economy, many of Berkshire's businesses grew in the second quarter by passing on higher costs to customers. BNSF Railway implemented a fuel surcharge and increased revenue per railway car, whereas Forest River Inc., a manufacturer of RVs, pontoon boats, and shuttle buses, reported higher average sales prices for its vehicles.
Inflation also hurt other businesses. Geico reported having to spend more on claims from auto-insurance customers due to rising car prices and shortages of car parts needed for repairs. This had an impact on its underwriting business.
Meanwhile, Berkshire continued to increase its stock market investments in the second quarter.
The majority of its funds were invested in the energy sector. Berkshire began buying Occidental Petroleum Corp. stock in February and quickly became the company's largest shareholder, with a 17 percent stake at the end of the second quarter. Since then, the company has increased its stake in Occidental to approximately 19%.
Because of the surge in oil prices following Russia's invasion of Ukraine, energy stocks have been by far the best performers in the stock market this year. Analysts believe Berkshire will soon reach a 20% stake in Occidental, allowing it to begin including a portion of the oil company's earnings in its own results.
As Berkshire invested more money in stocks, it slowed its share repurchase program. In the second quarter, the company spent $1 billion on stock buybacks, down from $3.2 billion the previous quarter.
Berkshire's spending had little impact on its cash position. The company reported $105.4 billion in cash and equivalents at the end of the quarter, a decrease from $106.3 billion at the end of the first.