Glossary · Defined term
Earnings per share (EPS)
Earnings per share is a company's net income divided by its shares outstanding, showing the profit belonging to each share.
Last updated Oct 2, 2026
What it means
Earnings per share is a company's net income divided by its number of outstanding shares, showing how much profit belongs to each share. Basic EPS uses the actual share count, while diluted EPS adjusts for stock options, convertible bonds, and other securities that could become shares and spread profits thinner. EPS is one of the most watched figures in earnings reports because it feeds directly into valuation ratios like the P/E ratio. Rising EPS can come from genuine profit growth or from shrinking the share count through buybacks. Investors usually compare EPS to analyst expectations and to prior periods rather than reading the raw number alone.
An example
For illustration, a company earns $100 million in net income with 50 million shares outstanding, giving basic EPS of $2.00. If employee stock options could add 5 million shares, diluted EPS falls to about $1.82 on 55 million shares. Analysts focus on the diluted figure because it reflects the fuller claim on profits.