How it works
Basic EPS = (net income − preferred dividends) / weighted-average common shares outstanding. Diluted EPS adjusts the share count upward for stock options, RSUs, convertible debt, and warrants. Diluted EPS is the more conservative and the figure most analysts use. EPS is reported each quarter in the 10-Q filing and annually in the 10-K. Adjusted or non-GAAP EPS strips out items the company considers one-off; these versions should always be compared to GAAP for consistency.
Example
Apple’s Q1 2025 reported diluted EPS of $2.40 on $36.3 billion net income and 15.1 billion diluted weighted shares. Trailing 12-month EPS was about $6.97. The same period’s revenue was $124 billion: gross margin was 46 percent, operating margin 35 percent. EPS captures both: it absorbs every operating and financing decision into one per-share number.
Why it matters
EPS is the denominator of P/E, the numerator of earnings yield, and the input most directly tied to share price over time. EPS growth, not just EPS level, drives equity returns. Watch for low-quality EPS growth driven by buybacks (which shrink the denominator) rather than net income growth. Real EPS expansion comes from revenue growth and margin expansion together, not from financial engineering.
