Wall Street Faces Earnings Quality Crisis Amid Pricey Market

Tariffs may grab headlines, but unsustainable income sources at top companies pose bigger threat to stock market

Published on Feb. 15, 2026

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Though President Donald Trump's tariff and trade policy has caused volatility on Wall Street, a more fundamental issue is threatening to derail the high-flying stock market: poor earnings quality at major companies. Top firms like Tesla and Apple are relying on non-operational income sources like regulatory credits and share buybacks to prop up their earnings, rather than delivering sustainable profit growth from their core businesses. With the stock market at historically high valuations, this earnings quality crisis could spell trouble for investors.

Why it matters

The stock market's record-setting run has been fueled by a handful of high-flying tech giants, but the sustainability of their earnings is now being called into question. If these market leaders can't deliver consistent, organic profit growth, it could trigger a long-overdue market correction and put the broader economic recovery at risk.

The details

Tesla, for example, is trading at over 200 times its projected 2026 earnings per share, yet a significant portion of its profits come from unsustainable sources like regulatory credits and interest income, rather than its core automotive business. Similarly, Apple has masked subpar sales and profit growth by aggressively buying back its own shares, artificially boosting its earnings per share. These tactics may be legal, but they raise concerns about the true health of these companies' operations.

  • In the two days following the reveal of President Trump's tariff and trade policy on April 2, the S&P 500 lost 10.5% of its value.
  • Since introducing the tariff and trade policy over 10 months ago, several changes have been made to the original reciprocal tariff rates due to dealmaking and/or implementation pauses.
  • The inflation rate has moved modestly higher since the president's tariffs began affecting the U.S. economy.

The players

Tesla

An electric vehicle and clean energy company that is trading at an estimated 202 times forecast earnings per share in 2026, with a significant portion of its profits coming from unsustainable sources like regulatory credits and interest income rather than its core automotive business.

Apple

A technology company that has been relying on a massive share buyback program to artificially boost its earnings per share, masking subpar sales and profit growth in its core business.

Donald Trump

The former President of the United States who introduced a series of tariffs and trade policies that have caused volatility in the stock market, though these are seen as less of a threat to the market than the earnings quality issues at major companies.

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What they’re saying

“While Donald Trump's tariffs have certainly made waves on Wall Street, they're of far less concern to the stock market than earnings quality.”

— Sean Williams, Author (fool.com)

What’s next

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The takeaway

This case highlights growing concerns in the community about repeat offenders released on bail, raising questions about bail reform, public safety on SF streets, and if any special laws to govern autonomous vehicles in residential and commercial areas.