NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS
Basic net earnings per share from continuing operations (“EPS”) is calculated by taking net earnings from continuing operations less the Mandatory Convertible Preferred Stock (“MCPS”) dividends divided by the weighted average number of common shares outstanding for the applicable period. Diluted net EPS from continuing operations is computed by taking net earnings from continuing operations less the MCPS dividends divided by the weighted average number of common shares outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially dilutive shares. For the years ended December 31, 2025, 2024 and 2023, 6.4 million, 1.3 million and 3.5 million options to purchase shares, respectively, were excluded from the diluted earnings per share calculation, as the impact of their inclusion would have been anti-dilutive.
Basic and diluted EPS are computed independently for each quarter and annual period, which involves the use of different weighted-average share count figures relating to quarterly and annual periods. As a result, and after factoring the effect of rounding to the nearest cent per share, the sum of prior quarter-to-date EPS figures may not equal annual EPS.
On April 17, 2023, all outstanding shares of the MCPS Series B converted into 8.6 million shares of the Company’s common stock. The impact of the MCPS Series B calculated under the if-converted method was anti-dilutive for the year ended December 31, 2023 and as such 2.5 million shares underlying the MCPS Series B were excluded in the calculation of diluted EPS and the related MCPS Series B dividends of $21 million were included in the calculation of net earnings for diluted EPS for the period. Refer to Note 18 for additional information about the MCPS Series B conversion.
Information related to the calculation of net earnings per common share from continuing operations for the years ended December 31 is summarized as follows ($ and shares in millions, except per share amounts):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Numerator: | | | | | |
| Net earnings from continuing operations | $ | 3,600 | | | $ | 3,899 | | | $ | 4,221 | |
| MCPS dividends | — | | | — | | | (21) | |
| Net earnings from continuing operations attributable to common stockholders for Basic and Diluted EPS | $ | 3,600 | | | $ | 3,899 | | | $ | 4,200 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Denominator: | | | | | |
| Weighted average common shares outstanding used in Basic EPS | 712.7 | | | 731.0 | | | 736.5 | |
| Incremental common shares from: | | | | | |
| Assumed exercise of dilutive options and vesting of dilutive RSUs and PSUs | 3.4 | | | 6.2 | | | 6.6 | |
| | | | | |
| | | | | |
| Weighted average common shares outstanding used in Diluted EPS | 716.1 | | | 737.2 | | | 743.1 | |
| | | | | |
| Basic EPS from continuing operations | $ | 5.05 | | | $ | 5.33 | | | $ | 5.70 | |
| Diluted EPS from continuing operations | $ | 5.03 | | | $ | 5.29 | | | $ | 5.65 | |
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.