Earnings per share, or EPS, is a company's profit for a period divided among its common shares. It anchors most headlines about quarterly results and is the denominator of the P/E ratio, so a small change in how it is measured can move a valuation a long way. Public companies print it at the foot of the income statement in two versions, basic and diluted, and many publish a third, adjusted EPS, on terms they set themselves. The stocks hub covers the basics of owning shares; this entry works through all three versions with Tesla's filings, and sets other large companies beside it.
How do you calculate basic and diluted EPS?
Basic EPS divides profit belonging to common shareholders by the average number of common shares outstanding; diluted EPS also counts shares that could still be issued.
The numerator is the profit left for the parent company's common shareholders. Profit belonging to outside owners of subsidiaries comes off first, then preferred dividends. JPMorgan Chase's 2025 10-K shows a bank-sized version: net income of $57,048 million, minus $1,099 million of preferred dividends, minus $268 million allocated to unvested restricted stock units that earn dividends, leaves $55,681 million. Spread over 2,776.5 million weighted average shares, that is basic EPS of $20.05. Adding 5.0 million shares from performance share units, restricted units that earn no dividends and stock appreciation rights brings diluted EPS to $20.02. JPMorgan's stock page shows where the shares trade now.
The denominator is an average weighted by time, not the count on the last day. IAS 33, the international standard, weights each block of shares by the fraction of the period it was outstanding, and US companies describe the same approach in their notes. A company that starts the year with 1,000 million shares and buys back 40 million exactly halfway through has a weighted average of 980 million, though only 960 million remain at year-end.
Diluted EPS then assumes that options and warrants worth exercising are exercised and that convertible securities are converted. Under the treasury stock method, the cash option holders would pay is assumed to buy back shares at the period's average market price, so only the net extra shares count. Ten million options with a $50 exercise price, in a year when the stock averaged $80, would bring in $500 million, enough to buy back 6.25 million shares, so 3.75 million are added. For a convertible bond, the if-converted method adds the conversion shares to the denominator and the bond's after-tax interest back to the numerator.
Anything that would raise EPS, or shrink a loss per share, is left out as anti-dilutive. Options whose exercise price is above the average market price fall in that group. When a company reports a loss, extra shares would make the loss per share look smaller, so basic and diluted loss per share are normally the same.
What did Tesla's 10-K report as its 2025 EPS?
Tesla's Form 10-K for 2025 reports basic EPS of $1.18 and diluted EPS of $1.08, and its notes show every step between the two.
Worked example: Tesla's basic and diluted EPS for 2025
| Line from the 10-K | 2025 |
|---|---|
| Net income | $3,855 million |
| Less: net income attributable to noncontrolling interests | $61 million |
| Net income attributable to common stockholders | $3,794 million |
| Weighted average shares, basic | 3,225 million |
| Basic EPS: $3,794 million ÷ 3,225 million | $1.18 |
| Add: shares from stock-based awards | 303 million |
| Weighted average shares, diluted | 3,528 million |
| Diluted EPS: $3,794 million ÷ 3,528 million | $1.08 |
| Awards left out as anti-dilutive | 4 million |
The 303 million award shares made the diluted count 9.4% larger than the basic count and diluted EPS 8.5% smaller than basic. Convertible notes and warrants, which added 9 million shares in 2024, added none in 2025. Net income attributable to common stockholders fell 46% from $7,091 million in 2024, and diluted EPS fell 47% from $2.04, slightly more because the diluted share count rose 0.9%.
The same note marks a limit on what "diluted" covers. Restricted stock awards stay out of the basic count until they vest and out of the diluted count until they are deemed earned. That policy applies to the roughly 423.7 million shares of performance-based restricted stock Tesla's board granted its chief executive in September 2025, which shareholders approved on November 6, 2025. The block equals 13% of the 2025 basic share count and is split into 12 tranches, each needing a market-value milestone and an operating milestone to vest. Diluted EPS reflects shares that existing contracts would add under present conditions, not every share that might be issued later. Tesla's stock page has the current price.
How much does dilution change EPS at large companies?
In the four 10-Ks below the gap ranges from 3 cents to 14 cents a share, and in each case the extra shares came from employee equity awards.
| Company and fiscal year | Basic EPS | Diluted EPS | Diluted shares vs basic | Diluted EPS vs basic |
|---|---|---|---|---|
| Tesla, 2025 | $1.18 | $1.08 | +9.4% | −8.5% |
| Broadcom, year to November 2, 2025 | $4.91 | $4.77 | +3.0% | −2.9% |
| Nvidia, year to January 25, 2026 | $4.93 | $4.90 | +0.6% | −0.6% |
| JPMorgan Chase, 2025 | $20.05 | $20.02 | +0.2% | −0.1% |
How wide the gap gets depends on how many options and awards are outstanding compared with the share count and, for options, on how far the average share price sits above their exercise prices. Nvidia's 10-K adds 155 million shares for equity awards and leaves out another 41 million as anti-dilutive. The Nvidia and Broadcom pages show where those shares trade now.
What is the difference between GAAP and adjusted EPS?
GAAP EPS follows the accounting rules a company must report under, while adjusted EPS, also called non-GAAP or core EPS, strips out items management chooses.
Tesla's quarterly updates, furnished to the SEC on Form 8-K, reconcile the two. Its adjusted figure adds back stock-based compensation and removes gains and losses on its digital assets, and for 2023 it also took out a one-time tax benefit.
Worked example: Tesla's GAAP and non-GAAP diluted EPS, 2023 to 2025
| Per diluted share | 2023 | 2024 | 2025 |
|---|---|---|---|
| GAAP diluted EPS | $4.30 | $2.04 | $1.08 |
| Stock-based compensation, net of tax | +$0.52 | +$0.38 | +$0.57 |
| Digital assets loss or gain, net of tax | — | −$0.13 | +$0.01 |
| Release of tax valuation allowance | −$1.70 | — | — |
| Non-GAAP diluted EPS | $3.12 | $2.29 | $1.66 |
For 2025 the adjusted figure was 54% higher than GAAP EPS, almost all of it from adding back stock pay, which is a real cost even though it is paid in shares rather than cash. For 2023 the adjustment ran the other way: GAAP EPS included $5,927 million, or $1.70 a share, from releasing a valuation allowance on deferred tax assets, and removing that one-time benefit left adjusted EPS below GAAP. Both versions divide by the same diluted share count, so the adjusted number keeps the extra award shares while dropping the expense behind them.
The gap widened in 2026. In the third quarter, stock-based compensation net of tax came to $0.28 a share, more than the $0.22 of GAAP diluted EPS, according to Tesla's Q3 2026 update.
US companies may publish adjusted EPS, but SEC staff guidance says a non-GAAP per-share performance measure should be reconciled to GAAP EPS, and the GAAP figure must appear with equal or greater prominence, including in earnings release headlines. The staff also warns that leaving out normal, recurring cash operating expenses can make a measure misleading. Cash-generation measures cannot be shown per share in SEC documents at all: the staff calls free cash flow a liquidity measure that must not be presented on a per-share basis.
Companies reporting under IFRS follow IAS 33, which requires basic and diluted EPS in the statement of comprehensive income with equal prominence, even when the figures are negative. Extra per-share amounts may appear only in the notes. Under amendments that arrive with IFRS 18, for annual periods beginning on or after January 1, 2027, their numerator must be a total or subtotal that IFRS 18 defines or a management-defined performance measure, with basic and diluted versions given equal prominence. How to read an earnings report shows where the reconciliation sits in a results release.
How does EPS feed the P/E ratio?
The P/E ratio divides the share price by EPS, so each choice of EPS (basic or diluted, GAAP or adjusted, annual or trailing) produces a different multiple.
Tesla closed at $399.81 on October 30, 2026. Its latest four quarters of GAAP diluted EPS were $0.24 for the fourth quarter of 2025 and $0.13, $0.32 and $0.22 for the first three quarters of 2026, a total of $0.91. The 10-Q gives the same answer by a shortcut: $1.08 for 2025, minus $0.84 for the first nine months of 2025, plus $0.67 for the first nine months of 2026. The matching non-GAAP quarters were $0.50, $0.41, $0.33 and $0.48.
| EPS for the four quarters to September 30, 2026 | Amount | P/E at $399.81 |
|---|---|---|
| GAAP diluted | $0.91 | 439 |
| GAAP basic | $1.00 | 400 |
| Non-GAAP diluted | $1.72 | 232 |
Same share, same price, three multiples between 232 and 439; only the earnings figure changed. Small earnings also make the ratio jumpy, since one more cent of trailing GAAP EPS would lower the multiple by about five points, and when EPS is negative the P/E has no meaning at all. In SEC filings and earnings releases, a company that presents a ratio built on a non-GAAP measure must also show the GAAP-based ratio with equal or greater prominence, the SEC staff says. The P/E ratio explained covers forward multiples, sector norms and the Shiller CAPE.
How does EPS compare with similar measures?
EPS sits between total profit and valuation: it turns net income into a per-share figure that price ratios and payout ratios then build on.
| Measure | How it is worked out | What it answers |
|---|---|---|
| Net income | Revenue minus all costs, interest and taxes | How much the whole company earned |
| Basic EPS | Profit for common shareholders ÷ weighted average shares | Profit per share actually outstanding |
| Diluted EPS | Basic EPS reworked with shares that options, awards and convertibles could add | Profit per share if those shares existed |
| Adjusted EPS | Company-defined profit ÷ diluted shares | Management's view of underlying profit |
| P/E ratio | Share price ÷ EPS | Price paid for each dollar of yearly profit |
| Payout ratio | Dividends per share ÷ EPS | Share of profit paid out as dividends |
| Fully diluted valuation | Token price × maximum token supply | A crypto project's value if every possible token existed |
Fully diluted valuation is a crypto metric that borrows the word. It counts every token a project could ever issue, while diluted EPS counts only shares that existing contracts would add under present conditions, and only when they lower EPS. The fully diluted valuation entry covers the token version. The payout ratio uses diluted EPS as its denominator, and the price-to-book ratio applies the same per-share approach to accounting equity instead of profit.
What mistakes do people make with EPS?
Most EPS mistakes come from comparing figures that were not built the same way.
- Ignoring a stock split. Per-share history is restated after a split. Nvidia reported fiscal 2024 diluted EPS of $11.93 in its February 2024 10-K; after its 10-for-1 split in June 2024, its later 10-Ks show that year as $1.19. IAS 33 requires the same retrospective adjustment. Stock splits explained covers the mechanics.
- Reading EPS growth as profit growth. Buybacks shrink the denominator. JPMorgan's net income fell 2.4% in 2025, to $57,048 million, while its basic EPS rose 1.3%, to $20.05, because the weighted average share count fell 3.4%.
- Ranking companies by EPS. The dollar figure depends on how many shares exist. JPMorgan's 2025 diluted EPS of $20.02 was about four times Nvidia's $4.90, yet Nvidia's net income of $120,067 million was 2.1 times JPMorgan's.
- Mixing continuing and discontinued operations. Broadcom's 10-K splits its fiscal 2024 diluted EPS into $1.29 from continuing operations and a $0.06 loss from discontinued operations, $1.23 in all. A growth rate should use the same line in both years.
- Matching the wrong years. Nvidia's fiscal 2026 ended January 25, 2026 and Broadcom's fiscal 2025 ended November 2, 2025, so a label such as "2025 EPS" covers different months at different companies.
- Missing one-off gains inside GAAP EPS. In the second quarter of 2026, an unrealized gain on Tesla's investment in SpaceX added $0.22 a share, net of tax, to GAAP diluted EPS of $0.32, according to the company's reconciliation.