Table of Contents APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Note 2 Earnings Per Share Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, restricted stock units, and employee stock purchase plan shares) outstanding during the period. Applied’s net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to the Company’s non-complex capital structure. Potentially dilutive securities attributable to outstanding stock options and restricted stock units are excluded from the calculation of diluted earnings per share where the combined exercise price and average unamortized fair value are greater than the average market price of Applied common stock, and therefore their inclusion would be anti-dilutive. Prior to the adoption of Accounting Standards Update (ASU) 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting  in the first quarter of fiscal 2018, the assumed tax benefits upon the exercise of options and vesting of restricted stock units were also included in this calculation. 74 Fiscal Year 2019 2018 2017 (In millions, except per share amounts) Numerator: Net income $ 2,706 $ 3,038 $ 3,519 Denominator: Weighted average common shares outstanding 937 1,013 1,073 Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares 8  13  11  Denominator for diluted earnings per share 945 1,026 1,084 Basic earnings per share $ 2.89  $ 3.00  $ 3.28  Diluted earnings per share $ 2.86 $ 2.96 $ 3.25 Potentially dilutive securities 3  —  — 