Earnings per share (EPS): basic vs diluted, with Apple’s numbers

Earnings per share (EPS) is a company's profit divided by the number of its shares. It answers a simple question an owner cares about: how much of this year's profit belongs to one share? It is the single most quoted number in an earnings report, the denominator of the P/E ratio and the figure analysts forecast quarter after quarter.

The simple version hides three real complications. The share count changes during the year, so you need an average. Some people hold rights to new shares (stock awards, options, convertibles), so there is a basic and a diluted figure. And buybacks shrink the count, so EPS can grow faster than profit. This page works through all three with Apple's fiscal 2025 10-K, where net income was $112.0 billion and diluted EPS was $7.46.

What EPS measures

EPS converts a company-wide total into a per-share amount so you can relate it to the share price. Net income of $112 billion is hard to judge on its own; $7.46 a share next to a share price of $255.46 gives you a P/E of 34.2 and an earnings yield of 2.9%.

US public companies must report EPS on the face of the income statement. The rules are in the FASB's Accounting Standards Codification Topic 260, Earnings Per Share, which sets out both the basic and the diluted calculation. Companies with only common stock and no potentially dilutive securities report a single number; almost every large company reports both.

Two adjustments matter before you divide. The numerator is profit available to common shareholders: if a company has preferred stock, the preferred dividends come off first. Apple has no preferred stock, so its numerator is simply net income. The denominator is the weighted-average number of common shares outstanding during the period.

Weighted-average shares

A company's share count moves all year. Apple bought back $90.7 billion of stock in fiscal 2025 and issued shares to employees as awards vested. Dividing a full year's profit by the year-end count would overstate EPS for a company shrinking its count and understate it for one issuing shares. Weighting each share by the fraction of the period it was outstanding fixes that.

Apple's weighted-average basic shares were 14,948.5 million in fiscal 2025, while the balance sheet shows 14,773.3 million outstanding on September 27, 2025. The year-end number is lower because buybacks continued all year; the average sits between the starting count (15,116.8 million) and the ending one.

Basic versus diluted EPS

Basic EPS counts only shares that exist. Diluted EPS asks: what if everyone holding a right to new shares used it? Stock options, restricted stock units (RSUs), warrants and convertible bonds can all add shares, which would spread the same profit more thinly. That spreading is Dilution.

The treasury-stock method

Incremental shares are not simply the number of awards outstanding. For options, RSUs and warrants, ASC 260 uses the treasury-stock method: assume the instruments are exercised, and assume the company uses the proceeds it would receive to buy back shares at the average market price for the period. Only the net new shares count.

For RSUs, which have no strike price, the assumed proceeds are mainly the compensation cost not yet recognized, so most of an RSU grant shows up as incremental shares. Apple's 10-K notes that about 24 million RSUs were left out of the fiscal 2023 diluted calculation because they were antidilutive. Convertible bonds use the if-converted method instead: add back the after-tax interest to the numerator and add the conversion shares to the denominator.

The gap between basic and diluted EPS is a quick gauge of how much potential dilution sits on top of the share count. At Apple it is small (3 cents on $7.49). At a young technology company that pays heavily in stock, or one with large convertible issues, the gap can be several percent.

How buybacks lift EPS

Because the share count is in the denominator, a shrinking count raises EPS even when profit is flat. Apple's diluted shares fell from 15,812.5 million in fiscal 2023 to 15,408.1 million in fiscal 2024 and 15,004.7 million in fiscal 2025. The fiscal 2025 step is a 2.6% decline, almost entirely from repurchases.

That gap is not a trick; each remaining share really does own more of the profit. But it is a different source of growth from selling more iPhones, and it costs cash. Apple spent $90.7 billion on repurchases in fiscal 2025, 81% of its net income. Whether that spending created value depends on the price paid, a question the Stock buybacks: how share repurchases work and what they do guide covers in detail. When you compare EPS growth across companies, check the share count line first.

EPS growth: which base year?

Apple's 22.7% EPS growth in fiscal 2025 is real arithmetic but a poor guide to the trend. Fiscal 2024's $6.08 included a one-time $10.2 billion income tax charge from the European Commission's State Aid decision, which cost about $0.67 a diluted share. Without it, fiscal 2024 EPS would have been $6.75, the number Apple itself shows in its non-GAAP reconciliation.

The adjusted figures treat the tax charge as a one-off, which is a judgment, not a GAAP rule. The GAAP vs non-GAAP earnings: how adjusted numbers are built page explains how that reconciliation works and when to trust it. The point for EPS: a growth rate is only as good as its base year. A depressed base inflates growth; an inflated base (a big one-time gain) hides it. Look at three or more years, not one.

Quarterly EPS that don't add up

Apple reports EPS every quarter. In fiscal 2025 the four quarters were $2.40, $1.65, $1.57 and $1.85, which sum to $7.47. The 10-K reports $7.46 for the year.

Nothing is wrong. Each quarter divides that quarter's profit by that quarter's average share count. The annual figure divides the whole year's profit by the whole year's average count. Because Apple's count fell steadily, the later quarters used smaller denominators, and the weights don't line up exactly. Rounding each quarter to the cent adds more noise. The Q4 figure in Apple's earnings release is itself derived as the full year less the first nine months as reported.

This matters when you build a trailing twelve months (TTM) EPS by adding the last four quarters, as most data providers do. A TTM sum can differ from a fiscal-year figure by a cent or two. For Apple, the four quarters to June 27, 2026 ($1.85 + $2.84 + $2.01 + $2.02) sum to $8.72, the TTM figure behind the trailing P/E on the Price-to-earnings ratio (P/E): formula, examples and limits page.

Pitfalls when using EPS

• EPS is not cash. It is accounting profit. A company can report rising EPS while cash from operations falls; Quality of earnings: accruals, cash conversion and red flags covers how to test the gap.
• One-time items swing it. Tax charges, legal settlements, asset sales and impairments all flow through GAAP EPS. Read the notes before reading the trend.
• Share count changes are not growth. Separate EPS growth into net income growth and share count change, as in the Apple example above.
• Different companies, different share prices. EPS of $7.46 versus $13.64 tells you nothing on its own; compare EPS to price (P/E) or EPS growth rates instead.
• Stock splits restate history. After a split, all earlier EPS figures are divided by the split ratio. Apple's 4-for-1 split in August 2020 is why its pre-2020 EPS looks small in restated tables.

EPS and its neighbours

How Finabase does it

The Financials tab lists EPS (basic) and EPS (diluted) in the income statement card, next to the weighted average shares (basic and diluted) that produced them. Switch between Annual and Quarterly with the toggle, and click any row to chart its history: charting diluted shares next to diluted EPS shows the buyback effect described above. Finabase's quarterly columns are labelled by calendar quarter, so Apple's fiscal Q3 2026 (ended June 27, 2026) appears as "Q2 2026".

The Earnings tab shows reported EPS beside the consensus estimate for each quarter, with the surprise in dollars and percent. The summary page shows EPS (TTM) in its key statistics, passed through from the data provider, and the Valuation tab charts EPS (diluted) year-over-year growth for ten fiscal years. The screener can filter on EPS.

Frequently asked questions

What is the difference between basic and diluted EPS?

Basic EPS divides profit by the shares that exist; diluted EPS also counts shares that stock options, RSUs, warrants and convertibles would create. Diluted EPS is always equal to or lower than basic. Apple's fiscal 2025 figures were $7.49 basic and $7.46 diluted.

Which EPS is used in the P/E ratio?

Diluted EPS, almost always. Data providers usually use the GAAP diluted EPS of the last four reported quarters (trailing twelve months); some sites also show a P/E on adjusted EPS, so check which one you are looking at.

Can EPS rise when profit falls?

Yes, if the share count falls faster than profit. A company that buys back 5% of its shares while net income falls 2% will report higher EPS. That is why you should always look at net income and the share count beside EPS.

Why do the four quarterly EPS figures not equal the annual EPS?

Each period uses its own weighted-average share count, and each quarter is rounded to the cent. Apple's fiscal 2025 quarters sum to $7.47 against an annual $7.46.

Summary

Earnings per share spreads a company's net income across its weighted-average share count. Basic EPS counts existing shares; diluted EPS adds the net new shares that awards and convertibles would create, using the treasury-stock or if-converted method. Apple's fiscal 2025 numbers show each piece: $112.0 billion of profit, 14.95 billion average shares, 56.2 million incremental shares, and EPS of $7.49 basic and $7.46 diluted. EPS growth of 22.7% came partly from a 2.6% smaller share count and partly from a depressed base year, so read EPS with the share count and the one-time items next to it.