How to calculate earnings per share

Earnings per share (EPS) is one of the most widely used metrics in financial reporting. Whether you're an investor tracking performance, a founder preparing for a board meeting, or part of a finance team working on earnings calls, EPS gives you a snapshot of profitability that’s easy to compare across companies and time periods.

What is earnings per share (EPS) and why does it matter?

EPS helps you evaluate a company’s profitability on a per-share basis. It is often used to compare financial performance across companies, especially those in the same industry. Public companies in the US are required to report EPS on their income statements, making it a standard part of financial analysis.

EPS is widely followed by investors, analysts, and finance teams because it connects company earnings to shareholder value. Over 78% of S&P 500 companies beat consensus EPS estimates in Q1 2024, demonstrating the close alignment between market expectations and actual results.

A growing EPS often indicates that a company is expanding its profit base without diluting the existing shareholders. For teams, it supports internal financial reporting, forecasting, and strategic planning. For investors, it forms the basis of key valuation metrics like the price-to-earnings ratio.

How to calculate EPS

Finance teams typically calculate EPS as part of quarterly and annual reporting. Analysts and investors also calculate this metric to compare profitability across companies or track performance over time.

EPS formula explained

The standard formula for earnings per share is:

EPS = (Net Income – Preferred Dividends) ÷ Weighted Average Shares Outstanding

This is the most commonly used version of the formula. You subtract preferred dividends because they are paid before common shareholders receive any earnings. What’s left shows how much of the company’s profit is available to you and other common shareholders.

Net income is the total profit after all expenses, taxes, and interest. You will find it at the bottom of the income statement, often labeled as “net earnings” or “net profit.” If the company has no preferred stock, you can use net income on its own.

The denominator reflects the weighted average number of common shares outstanding during the reporting period. This part matters because companies issue and buy back shares throughout the year. Using a weighted average ensures the EPS reflects actual shareholder exposure during the period, not just a snapshot at the end.

For example, if a company had 10 million shares at the start of the year and issued another 2 million in June, the full 12 million shouldn’t be used. Instead, the formula adjusts based on how long each portion of the shares has existed in the market.

How to find earnings per share on the income statement

You can find earnings per share listed near the bottom of a company’s income statement. Most public companies report both basic and diluted EPS, often presented alongside net income and total shares outstanding.

Look for a section labeled “Earnings per share” or “Net income per share.” This typically appears after the net income line and shows two values. Basic EPS uses the standard share count, while diluted EPS includes the effect of stock options, convertible securities, and other instruments that could increase the total number of shares.

If the company has preferred stock, you may also see a line item for preferred dividends. These are subtracted from net income to calculate EPS for common shareholders.

The weighted average shares used in the EPS calculation are sometimes listed in the footnotes, especially in quarterly or annual reports filed with the SEC. These figures provide the necessary context to understand how the company arrived at its reported EPS.

Real EPS calculation example: Apple (2024)

Public companies report earnings per share in every quarterly and annual filing. EPS is reviewed by analysts, investors, and finance teams each time results are published, making it one of the most closely watched figures in financial reporting. Since the calculation follows a consistent formula, you can use real financial statements to understand how the number is built.

Below is a step-by-step example using Apple’s 2024 income statement:

• Step 1: Start with net income. Net income is the company’s total profit after all expenses, taxes, and interest have been deducted. You’ll find this number at the bottom of the income statement. In 2024, Apple reported $93.74 billion in net income.
• Step 2: Subtract preferred dividends. If a company pays dividends to preferred shareholders, those payments are deducted before calculating EPS for common shareholders. These dividends are usually listed separately in the notes to the financial statements. Apple does not have preferred shares, so there are no preferred dividends to subtract.
• Step 3: Use the weighted average of shares outstanding. Companies issue and repurchase shares throughout the year, causing the share count to fluctuate over time. To account for this, EPS uses the weighted average number of shares outstanding during the reporting period. Apple’s weighted average share count for 2024 was 15.408 billion diluted shares. This includes stock options and other convertible instruments that could turn into common shares.
• Step 4: Plug the numbers into the formula. Now that you have both inputs, you can calculate EPS with the formula. Divide Apple’s net income of $93.74 billion by its weighted average of 15.408 billion diluted shares. This gives you an earnings per share value of $6.08 for the 2024 fiscal year. This figure aligns with the diluted EPS that Apple reported in its official financial statements.

This EPS figure gives you a consistent measure of profitability that can be compared across companies or tracked over time. Since Apple’s basic and diluted EPS are nearly identical, it also shows limited dilution from stock-based compensation or other convertible instruments.

How is basic EPS different from diluted EPS?

The key difference between basic and diluted earnings per share lies in how they treat potential shares. Basic EPS includes only the current outstanding common shares. Diluted EPS factors in all possible shares that could be created through things like employee stock options, convertible debt, or restricted stock units.

This difference matters because basic EPS reflects profit per share today. Diluted EPS, on the other hand, shows what could happen if the share count grows in the future.

What is considered a good EPS ratio?

A good earnings per share ratio depends on the company’s size, industry, and growth stage. There is no fixed number that works across the board. Instead, you can assess EPS by looking at how it trends over time, how it compares to direct competitors, and how it supports the company’s long-term goals.

In mature industries like consumer goods or banking, companies with steady earnings often report lower EPS growth but higher consistency. For example, Procter & Gamble reported an EPS of $6.30 in 2025, reflecting stable income in a low-volatility sector.

High-growth sectors, such as tech or biotech, may exhibit smaller or more volatile EPS numbers due to reinvestment or delayed profitability. In 2023, Amazon reported an EPS of $2.90, despite strong revenue growth, as it continued to invest in infrastructure and expand its AI capabilities.

A rising EPS over time usually signals that the company is growing its net income without significantly increasing its share count. If EPS declines while revenue rises, it could indicate rising costs, increased dilution, or weaker margins.

How does EPS compare to other financial metrics?

Earnings per share give you a focused view of a company’s profitability, but it doesn’t tell the full story on their own. Comparing EPS with other financial metrics helps you understand how efficiently the company operates, how it manages costs, and how it performs in relation to growth or valuation benchmarks.

EPS vs. revenue

EPS and revenue measure different aspects of a company’s performance. Revenue shows how much money the company brings in through sales. EPS shows the amount of profit remaining for each share after covering all costs, taxes, and interest.

You may see revenue grow while EPS stays flat or declines. This often means the company is spending more to generate sales or facing pressure from higher operating costs. In contrast, rising EPS without strong revenue growth can signal cost cutting, share buybacks, or improved margins.

In 2023, Meta reported a 16% increase in revenue, while EPS rose by over 70% due to cost reductions and operational efficiency improvements. This gap shows why both figures matter when evaluating business performance.

Revenue helps you understand top-line growth and market demand. EPS helps you assess how much value the company returns to each shareholder after expenses. Looking at both together shows whether the business is scaling profitably or simply growing in size.

EPS vs. P/E ratio

EPS shows how much profit a company earns per share. The price-to-earnings (P/E) ratio compares the company's profit to its stock price. While EPS measures performance, the P/E ratio helps you understand how the market values that performance.

To calculate the P/E ratio, divide the current share price by the earnings per share. This tells you how much investors are willing to pay for one dollar of earnings. A higher P/E often reflects strong growth expectations. A lower P/E can signal undervaluation or weaker future prospects.

For example, Nvidia reported an EPS of $11.93 in fiscal 2024. With a stock price exceeding $800, the P/E ratio surpassed 65, indicating high investor confidence in future earnings growth. In contrast, many legacy companies trade at P/E ratios between 10 and 20, reflecting steadier but slower growth.

EPS helps you track profitability, while the P/E ratio shows how that profit translates into market value. Looking at both gives you a clearer view of whether a stock is priced in line with its earnings power.

FAQ

Why can a company report negative EPS, and what does it signal for investors?

A company reports negative EPS when it has a net loss for the reporting period. This means that expenses exceeded revenue, resulting in no profit to distribute per share. Negative EPS often appears in early-stage companies or during downturns and may signal operational challenges or heavy reinvestment.

How does a stock split change the reported earnings per share?

A stock split increases the number of shares outstanding while reducing the price per share proportionally. EPS decreases after a split, but the total value of the company stays the same. Financial statements adjust historical EPS figures to reflect the new share count, ensuring consistency across reporting periods.

How do IFRS and US GAAP differ in their treatment of EPS?

Both IFRS and US GAAP require EPS disclosure but differ slightly in presentation and calculation details. Under IFRS, EPS must be presented separately on the face of the income statement for continuing and discontinued operations. US GAAP offers more detailed guidance on calculating and disclosing diluted EPS, especially for complex capital structures.

Can EPS be used to estimate the value of early-stage or private companies?

EPS has limited value for early-stage or private companies. These businesses may not be profitable yet or may reinvest earnings aggressively, resulting in low or negative EPS. Other metrics like revenue growth, gross margin, or unit economics are often more useful for valuation in these cases.

What happens to EPS when a company issues a large secondary offering of shares?

A secondary offering increases the number of shares outstanding, which can reduce EPS if earnings stay the same. The dilution effect depends on how the capital is used. If it funds growth that boosts future earnings, EPS may recover or grow over time.