Berkshire's Operating Earnings Rose $1.8 Billion Last Quarter. A Currency Swing Was $1.2 Billion of It.

Berkshire Hathaway's (NYSE: BRKA)(NYSE: BRKB) second-quarter operating earnings, reported Saturday, rose 16% year over year -- to $12.98 billion from $11.16 billion, an increase of about $1.8 billion. And about $1.2 billion of that increase came from one unusual place: the changing dollar value of Berkshire's own debt.

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Berkshire and its finance arm owe billions in euro-, pound-, and yen-denominated senior notes (about 4.85 billion euros, 1.75 billion pounds, and 2,481 billion yen at par).

Accounting rules require the company to restate what those borrowings are worth in dollars every quarter, with the change flowing through earnings. The swings can be large simply because the borrowings are.

In the second quarter of 2025, that revaluation produced an $877 million after-tax loss. This year, the same item produced a $326 million gain. The difference between those two figures, about $1.2 billion, sits inside operating earnings, in an "other" category that jumped to $1.27 billion from $32 million a year ago.

The rest of the quarter was more ordinary. Manufacturing, service and retailing earnings rose 24% year over year to $4.5 billion, the strongest part of the report. Berkshire Hathaway Energy earned $891 million, up 27%, and BNSF railroad earnings grew 6% to $1.6 billion. Insurance went the other way: Underwriting profit fell 13% to $1.7 billion, and insurance investment income slipped 9% to $3.1 billion.

Strip the currency swing out of both periods, and operating earnings grew to about $12.7 billion from about $12.0 billion a year earlier. That's growth of about 5%.

There's some irony in where the item sits. Berkshire urges shareholders to ignore its reported net earnings ($25.7 billion this quarter), because accounting rules push unrealized stock-portfolio swings through that figure -- swings the company itself calls usually meaningless. Operating earnings are the measure Berkshire points investors toward instead.

However, currency moves on debt are arguably the same kind of noise. They're driven by exchange rates, not by how the railroad or the insurers ran, and they'll likely swing the other way in some future quarter. They just happen to sit inside the operating number.

And this isn't a one-quarter quirk.

The first quarter's comparison had the same kind of help, worth about $1 billion, as a $249 million currency gain replaced a $713 million year-ago loss. For the first half, operating earnings rose 17% as reported -- but about 6% with the currency effect stripped from both years.

In short, a quarter of about 5% underlying growth, with manufacturing accelerating and insurance softening, is an ordinary Berkshire result. Solid, not spectacular. The 16% headline is the number that needs an asterisk next to it.

Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.