Earnings per Share

We compute earnings per share (EPS) of Class A and Class B common stock using the two-class method required for participating securities. We consider restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares.

Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of our Class A and Class B common stock outstanding, adjusted for outstanding shares that are subject to repurchase.

For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans. In addition, the computation of the diluted EPS of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted EPS of Class B common stock does not assume the conversion of those shares to Class A common stock. Diluted EPS attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding. Basic and dilutive securities in our basic and diluted EPS calculation for the three and nine months ended September 30, 2014 do not include contingent earn-out shares resulting from our acquisition of Oculus. Issuance of these earn-out shares is dependent upon the completion of certain milestones. These milestones were not met as of September 30, 2014 and accordingly, these shares are excluded from the effect of basic and dilutive securities.

We have also excluded 15 million restricted stock units (RSUs) from the EPS calculation for the nine months ended September 30, 2013 because the impact would be anti-dilutive. Shares excluded from the calculation were not material for the three and nine months ended September 30, 2014 and the three months ended September 30, 2013.

Basic and diluted EPS are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The numerators and denominators of the basic and diluted EPS computations for our common stock were calculated as follows (in millions, except per share amounts):



	Three Months Ended September 30,								Nine Months Ended September 30,
	2014				2013				2014				2013
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Basic EPS:
Numerator
Net income	$	632	$	174	$	320	$	105	$	1,747	$	492	$	717	$	260
Less: Net income attributable to participating securities	3		1		2		1		8		2		4		2
Net income attributable to common stockholders	$	629	$	173	$	318	$	104	$	1,739	$	490	$	713	$	258
Denominator
Weighted average shares outstanding	2,032		567		1,833		611		2,006		570		1,773		649
Less: Shares subject to repurchase	4		8		6		8		5		6		5		9
Number of shares used for basic EPS computation	2,028		559		1,827		603		2,001		564		1,768		640
Basic EPS	$	0.31	$	0.31	$	0.17	$	0.17	$	0.87	$	0.87	$	0.40	$	0.40
Diluted EPS:
Numerator
Net income attributable to common stockholders	$	629	$	173	$	318	$	104	$	1,739	$	490	$	713	$	258
Reallocation of net income attributable to participating securities	4		—		3		—		10		—		6		—
Reallocation of net income as a result of conversion of Class B to Class A common stock	173		—		104		—		490		—		258		—
Reallocation of net income to Class B common stock	—		7		—		13		—		18		—		29
Net income attributable to common stockholders for diluted EPS	$	806	$	180	$	425	$	117	$	2,239	$	508	$	977	$	287
Denominator
Number of shares used for basic EPS computation	2,028		559		1,827		603		2,001		564		1,768		640
Conversion of Class B to Class A common stock	559		—		603		—		564		—		640		—
Weighted average effect of dilutive securities:
Employee stock options	13		13		59		59		13		13		69		69
RSUs	36		14		33		33		32		13		21		21
Shares subject to repurchase	8		5		6		6		6		3		6		6
Number of shares used for diluted EPS computation	2,644		591		2,528		701		2,616		593		2,504		736
Diluted EPS	$	0.30	$	0.30	$	0.17	$	0.17	$	0.86	$	0.86	$	0.39	$	0.39