Earnings per Share (EPS): How to Calculate and Read It
Joan Sacdalan
Earnings per share (EPS) is a company's profit for a period divided by its number of shares. The formula is EPS = (net income − preferred dividends) ÷ weighted average common shares outstanding. Apple earned $132.18 billion in fiscal 2026 on about 14.66 billion weighted shares, so its basic EPS was $9.01 and its diluted EPS was $8.98.
EPS is the number analysts forecast, companies beat or miss, and the "E" in the P/E ratio. It tells you how much profit belongs to each share you own, but not whether that profit came from a growing business or a shrinking share count.
This guide is for self-directed investors who read earnings reports and want to check the numbers themselves. You will learn to calculate EPS from a 10-K, tell basic from diluted and GAAP from adjusted, and spot when EPS growth is mostly buybacks.
Key takeaways
EPS = (net income − preferred dividends) ÷ weighted average shares. Use diluted EPS when you compare companies or calculate a P/E ratio.
Apple's diluted EPS rose 332% from fiscal 2016 to fiscal 2026 while net income rose 189%; a 33% drop in diluted shares made up the difference.
At six of seven large companies we checked, EPS grew faster than net income over three years. JPMorgan's EPS rose 65.6% on 51.4% profit growth.
Dilution is usually small but not always: Tesla's 2025 diluted EPS was 8.47% below its basic EPS, against 0.15% at JPMorgan.
Adjusted EPS is not always the higher number. PepsiCo's first-quarter 2026 GAAP EPS of $1.70 was above its core EPS of $1.61.
What is earnings per share (EPS)?
Earnings per share is the slice of a company's profit that belongs to one common share. If a company earned $100 million and had 50 million shares, each share earned $2.
Profit is not paid out as EPS. The company can pay part of it as a dividend, buy back shares, pay down debt or reinvest it. EPS measures what each share earned, not what it received.
Every US public company must report EPS on the face of its income statement, in two versions: basic and diluted. You will find both near the bottom of the statement, just below net income, in the quarterly 10-Q and annual 10-K filings on SEC EDGAR.
Net income is profit after every cost, interest payment and tax. Weighted average shares are the average number of common shares outstanding during the period, weighted by how long each share was outstanding, so shares bought back in March count for less of the year than shares bought back in December.
EPS is the most watched number in an earnings report. In the third quarter of 2026, 84% of S&P 500 companies reported EPS above analysts' estimates, according to FactSet. Our guide to the earnings surprise explains how that beat is scored and why the stock does not always follow it.
How do you calculate EPS? A step-by-step example
You need three numbers from the income statement: net income, preferred dividends and the weighted average share count. Here is Apple's fiscal 2026, from the 10-K it filed on November 3, 2026.
- Find net income. Apple's net income for the year ended September 26, 2026 was $132,175 million.
- Subtract preferred dividends. Apple has no preferred stock, so the full $132,175 million belongs to common shareholders.
- Find the weighted average share count. Apple reported 14,661,935 thousand basic weighted shares, about 14.66 billion.
- Divide. $132,175 million ÷ 14,661.9 million shares = $9.01 basic EPS.
- Repeat with diluted shares. Apple's diluted weighted shares were 14,720,306 thousand. $132,175 million ÷ 14,720.3 million = $8.98 diluted EPS. The difference comes from employee stock awards that could become shares.
When preferred dividends matter
Banks often have preferred stock, and its dividends come before common shareholders. JPMorgan reported 2025 net income of $57,048 million, but only $55,681 million was available to common stockholders after preferred dividends and other adjustments. Divided by 2,776.5 million basic shares, that is $20.05 basic EPS. Using full net income would overstate it at $20.55.
Quarterly, annual and trailing EPS
Companies report EPS for each quarter and for the year. Trailing twelve months (TTM) EPS adds the last four quarters, and it is the figure most P/E ratios use. Forward EPS is analysts' estimate for the next twelve months; FactSet put the S&P 500's forward P/E at 17.7 on November 5, 2026.
What is the difference between basic and diluted EPS?
Basic EPS divides profit by the shares that exist today. Diluted EPS adds every share that could exist from stock options, restricted stock units, warrants and convertible bonds that are in the money. Diluted EPS is always equal to or lower than basic EPS when a company is profitable.
Use diluted EPS for valuation. It is the more conservative number, and it is what analysts' estimates and most P/E ratios use. For most large companies the gap is small. For companies that pay heavily in stock, it is not.
Basic vs diluted EPS: how much dilution costs shareholders
Tesla's 2025 basic EPS was $1.18 and its diluted EPS $1.08, a gap of 8.47%. That is more than 50 times JPMorgan's 0.15%. A fast-growing company that pays staff in stock can dilute shareholders by several percent a year, and diluted EPS is where you see it first.
GAAP vs adjusted EPS: which number should you trust?
GAAP EPS follows US accounting rules and is the figure in the 10-K. Adjusted EPS, also called non-GAAP, core or operating EPS, removes items management considers one-time or non-cash, such as restructuring costs, legal settlements and investment gains or losses.
The two can be far apart. FactSet's November 6, 2026 report showed Meta's third-quarter GAAP EPS at $3.83 against an estimate of $6.54, after a $9.89 billion charge for a litigation agreement. Alphabet's GAAP EPS of $2.12 against $3.02 included an $8.7 billion loss on equity securities.
Adjustments do not only push EPS up. PepsiCo's first-quarter 2026 GAAP EPS was $1.70, up 27%, while its core EPS was $1.61, up 9%. PepsiCo guides on core EPS because, its release says, it cannot predict items in GAAP results such as commodity mark-to-market impacts.
| EPS type | What it counts | Where to find it | Weak spot | Best for |
|---|---|---|---|---|
| Basic EPS | Profit ÷ shares outstanding | Income statement | Ignores options and convertibles | A quick first read |
| Diluted EPS (GAAP) | Profit ÷ all potential shares | Income statement | Includes one-time items | P/E ratios and comparisons |
| Adjusted EPS | Profit before items management excludes | Earnings release | Company chooses the exclusions | Matching analysts' estimates |
| Trailing (TTM) EPS | Last four reported quarters | Add up four 10-Qs and 10-Ks | Looks backward | Trailing P/E |
| Forward EPS | Analysts' next-12-month estimate | Data providers | An estimate, often revised | Forward P/E and screening |
A good habit is to read both numbers and the reconciliation table in the earnings release. If a company excludes the same "one-time" cost every year, treat it as an ongoing cost.
What is a good EPS?
There is no good EPS number on its own. JPMorgan's $20.02 diluted EPS is not better than Coca-Cola's $3.04: each company simply has a different number of shares. EPS only means something when you compare it with the share price, the company's past and its peers.
- Against the price: price ÷ EPS gives the P/E ratio. Our guide to what a good P/E ratio is covers the ranges by sector.
- Against the past: steady growth in diluted EPS over five to ten years is a better sign than one big jump.
- Against estimates: the market reacts to EPS against what analysts expected, not the number itself.
- Against cash: compare EPS with free cash flow per share. Profit that never turns into cash deserves a closer look.
What does negative EPS mean?
Negative EPS means the company lost money. Ford's 2025 net loss attributable to common stockholders was $8.18 billion, a diluted EPS of −$2.06. A P/E ratio cannot be calculated on negative EPS, so investors look at sales, cash flow or forward EPS instead.
Is rising EPS always a sign of a growing business?
No. EPS can rise because profit grew, because the share count fell, or both. A company that buys back 5% of its shares lifts EPS by about 5% with no change in profit. That is a real gain for shareholders who stay, but it is not the same as a growing business.
To test this, we pulled three years of 10-K data for seven large companies and compared net income growth with diluted EPS growth.
EPS grew faster than profit: three-year growth at six large companies
Net income growthDiluted EPS growth
| Company | Period | Net income | Diluted EPS | Diluted shares |
|---|---|---|---|---|
| Meta | 2022 to 2025 | +160.6% | +173.5% | −4.7% |
| Microsoft | FY2023 to FY2026 | +84.8% | +85.4% | −0.3% |
| JPMorgan | 2022 to 2025 | +51.4% | +65.6% | −6.3% |
| Coca-Cola | 2022 to 2025 | +37.4% | +38.8% | −0.9% |
| Apple | FY2023 to FY2026 | +36.3% | +46.5% | −6.9% |
| P&G | FY2023 to FY2026 | +9.5% | +12.2% | −2.5% |
| Tesla | 2022 to 2025 | −69.8% | −70.2% | +1.5% |
EPS outgrew profit at all six companies with a falling share count. Apple's gap was the clearest: net income rose 36.3% and EPS rose 46.5%. Tesla went the other way; its share count rose 1.5%, so EPS fell slightly more than profit.
Microsoft is the useful contrast. Its share count barely moved, so its 85.4% EPS growth was almost entirely profit growth. Two stocks with the same EPS growth can be very different businesses.
How did Apple grow EPS by 332% in ten years?
Apple is the best-known case of buybacks driving EPS. From fiscal 2016 to fiscal 2026, its net income rose from $45.69 billion to $132.18 billion, up 189%. Its split-adjusted diluted EPS rose from $2.08 to $8.98, up 332%. The diluted share count fell from about 22.0 billion to 14.72 billion, down 33%.
Apple's diluted EPS, fiscal 2016 to 2026 (split-adjusted)
The chart shows two phases. EPS was nearly flat from fiscal 2018 to fiscal 2020, around $3, then jumped 71% to $5.61 in fiscal 2021 as profit surged. From fiscal 2022 to fiscal 2024 it stalled near $6.10 before rising again.
For an investor, the lesson is to split EPS growth into two parts. Apple's profit grew 2.9 times, and the smaller share count multiplied that by about 1.5 to reach 4.3 times. Buybacks only add value if the shares were bought at a fair price, so check the P/E the company paid as well.
What are the risks and most common mistakes with EPS?
- Comparing EPS across companies. A $20 EPS is not better than a $3 EPS. Compare P/E ratios or growth rates instead.
- Using basic EPS for valuation. At a company that pays heavily in stock, basic EPS flatters the P/E.
- Mixing GAAP and adjusted figures. Check which number the estimate was for before deciding whether a company beat.
- Ignoring the share count. Read the weighted share line every year. A rising count means dilution; a falling count means buybacks are doing some of the work.
- Treating one-time items as one-time. If "special" charges appear every year, count them.
- Forgetting stock splits. Apple's fiscal 2016 EPS was $8.31 as filed and $2.08 after its 2020 split. Always use split-adjusted history.
The biggest risk is that EPS is an accounting figure. It depends on judgments about depreciation, revenue timing and reserves. Cash flow is harder to shape, which is why EPS and cash flow should be read together.
Which EPS measure fits your investing style?
Best for long-term investors: diluted GAAP EPS over five to ten years
Look at the long trend in diluted EPS next to net income and the share count. You want profit growth to drive most of it, and you want cash flow to keep up.
Best for earnings traders: adjusted EPS against the estimate
The market trades the reported adjusted figure against consensus, plus guidance. Our guide on how to trade earnings covers what happens in the hours around a report.
Best for value investors: trailing and forward EPS together
Trailing EPS shows what the company earned. Forward EPS shows what analysts expect. A low P/E on trailing EPS with falling forward estimates is a common value trap.
Cost, time and effort
- Cost: nothing. Every US company's EPS, net income and share counts are free on SEC EDGAR.
- Time: about 15 minutes per company to pull ten years of EPS, net income and diluted shares from the 10-K.
- Skill: basic arithmetic and the patience to read the reconciliation table in each earnings release.
The TruthSayer EPS Quality Check: five steps for any company
We use these five steps to judge whether EPS growth is real before we rely on it.
- Use diluted, split-adjusted EPS. Pull at least five years from the 10-K, not a data site that may mix GAAP and adjusted figures.
- Split the growth. Compare EPS growth with net income growth. If EPS grew more than 10 points faster, buybacks are carrying much of the growth.
- Check the dilution gap. Divide (basic − diluted) by basic. Above 2%, look at how much the company pays in stock.
- Compare GAAP with adjusted. If adjusted EPS beats GAAP by more than 10% for three years running, treat the excluded costs as real.
- Match EPS to cash. Compare EPS with free cash flow per share over three years. A widening gap is a warning sign.
Apple passes step 3 easily, with a 0.33% dilution gap. On step 2 it shows a 10.2-point gap over three years, so part of its EPS growth is buybacks. That is not a red flag, but it should lower how much growth you pay for.
How does TruthSayer AI use EPS?
Earnings AI scans US-listed companies ahead of their reports and opens positions in a funded account, typically one to four hours before the report. It is a bet on the EPS result and the reaction before they are known, not on reading the headline afterward.
Apple's fiscal fourth quarter of 2026 shows how this works. Apple reported EPS of $2.10 against the $1.99 consensus after the close on November 2, 2026. Earnings AI bought at $337.31 before the report and sold at $354.13 on November 4, a net gain of $74.12, or 4.39% after commissions.
Not every trade wins, and every trade, including losers, stays on the public list. As of November 9, 2026, the Earnings AI page shows a 31.85% return since inception against 35.09% for the S&P 500 over the same dates, a 72.8% win rate, a Sharpe ratio of 3.94, a beta of 0.30 and an average hold of 29 days. TruthSayer AI claims compliance with GIPS®, the global performance reporting standard; see our GIPS disclosures.
The seven companies in the growth test are large, well-known US companies across technology, banking and consumer goods, and we included Tesla because its result went the other way. All figures come from annual 10-K data in SEC EDGAR, using each company's three most recent fiscal years, so no period was picked to suit the argument.
What should you do next?
- If you own a stock: pull its diluted EPS, net income and share count for five years and run step 2 of the EPS Quality Check.
- Before buying: calculate the P/E on diluted GAAP EPS and on adjusted EPS. If the two differ a lot, read why.
- Before an earnings report: find out whether the consensus is for GAAP or adjusted EPS, so you score the result correctly.
To go further, read about post-earnings announcement drift, and see the glossary entry on earnings releases.
The bottom line: EPS is net income minus preferred dividends, divided by weighted average shares. Use diluted EPS for valuation, read GAAP and adjusted figures side by side, and always compare EPS growth with profit growth. At six of seven large companies we checked, EPS outgrew profit because share counts fell; at Apple, a 33% smaller share count turned 189% profit growth into 332% EPS growth. Rising EPS is good news only when you know where it came from.
Frequently asked questions
What is the formula for earnings per share?
EPS equals net income minus preferred dividends, divided by the weighted average number of common shares outstanding. For diluted EPS, add shares that could be created from options, stock awards and convertible securities. Apple's fiscal 2026 net income of $132.18 billion divided by 14.72 billion diluted shares gives $8.98.
Is a higher EPS always better?
No. EPS depends on how many shares a company has, so a $20 EPS is not better than a $3 EPS at another company. What matters is EPS growth over time, how it compares with the share price through the P/E ratio, and whether profit growth or buybacks drove it.
Why is diluted EPS lower than basic EPS?
Diluted EPS divides profit by a larger share count that includes stock options, restricted stock units and convertible securities that could become shares. For most large companies the gap is under 2%. Tesla's 2025 gap of 8.47% shows how much heavy stock-based pay can dilute existing shareholders.
I bought a stock because EPS was rising. How do I check that growth is real?
Open the last three 10-K filings and compare growth in net income with growth in diluted EPS. If EPS grew more than 10 points faster, buybacks did much of the work. Then compare EPS with free cash flow per share. If cash keeps up, the growth is likely sound.
My stock beat EPS estimates but fell. What should I do?
First check whether the beat was on GAAP or adjusted EPS, then read the guidance, which often matters more than the quarter. Apple beat by 5.53% in November 2026 and fell 2.18% the next session on weaker margin guidance. Decide based on your original reason for owning it, not the one-day move.
Where can I find a company's EPS for free?
SEC EDGAR has every US public company's 10-K and 10-Q filings, with basic and diluted EPS on the income statement. Earnings releases on company investor relations sites add adjusted EPS and a reconciliation. Most brokerage apps also show trailing and forward EPS, though their definitions vary.
Sources
- SEC EDGAR, Form 10-K filings and XBRL company facts for Apple, Microsoft, Procter & Gamble, JPMorgan Chase, Meta Platforms, Coca-Cola, Tesla, Amazon, Nvidia and Ford (retrieved Nov 9, 2026)
- Apple Inc., Form 10-K for the fiscal year ended September 26, 2026 (filed Nov 3, 2026)
- PepsiCo, First-Quarter 2026 Results (Apr 16, 2026)
- FactSet, Earnings Insight (Nov 6, 2026)
- TruthSayer AI, Earnings AI performance and trade list (Nov 9, 2026)
This article is for educational purposes only and is not investment advice. Past performance does not guarantee future results.
Joan Sacdalan
Joan specializes in financial data analytics, market intelligence, and investment research at TruthSayer AI. Her expertise spans fundamental and technical analysis, emerging market trends, and data-driven investment strategies, turning complex financial data into clear, actionable intelligence for risk-aware investors.
