Diluted EPS

Diluted EPS computes earnings per share on a share count that assumes all in-the-money stock options, restricted stock units, and convertible securities are exercised. It is mechanically more conservative than basic EPS (which uses only common shares actually outstanding) and is the standard quoted figure across financial reports and analyst databases. The reason to prefer diluted is honesty about ownership claims: option grants and RSU vesting transfer economic ownership over time, and a basic-EPS lens systematically understates that dilution until the moment of exercise. For high-SBC businesses — software, biotech, anything where equity compensation is a meaningful percentage of revenue — the gap between basic and diluted EPS can be material, and a buyback program that holds basic share count flat while diluted share count creeps higher is doing less for shareholders than it appears.