Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) APPLIED MATERIALS, INC. 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. 74 Fiscal Year 2020 2019 2018 (In millions, except per share amounts) Numerator: Net income $ 3,619  $ 2,706  $ 3,038  Denominator: Weighted average common shares outstanding 916  937  1,013  Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares 7  8  13  Denominator for diluted earnings per share 923  945  1,026  Basic earnings per share $ 3.95  $ 2.89  $ 3.00  Diluted earnings per share $ 3.92  $ 2.86  $ 2.96  Potentially dilutive securities —  3  — 