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DraftKings slashed its 2026 earnings forecast even as it spends more on prediction markets, the company revealed in its third-quarter earnings report after trading hours Thursday.
Shares fell more than 20% to close Friday at a new 52-week closing low of $18.51.
CEO Jason Robins defended the investment during Friday’s earnings call, arguing that the company’s early results justify the cost.
“I’m really bullish about that part of the business,” Robins said. “I know everyone’s a little surprised at how much we spent, and I wish you all could see every data point that we see.”
Other key financial figures:
- DraftKings cut its full-year adjusted EBITDA forecast to between $175 million and $275 million, to account for the additional $650 million to $700 million in predictions investments, CFO Alan Ellingson said.
- The company also reported $1.33 billion in third-quarter revenue, up 16.2% from the third quarter of 2025.
- The third-quarter net loss was $468.7 million, compared to a net loss of $256.8 million a year earlier.
Rapid growth in prediction markets
DraftKings added more than 1.6 million customers to its prediction markets platform this year. The company also says its prediction markets exchange, DKeX, has already climbed to third place in the industry by trading volume, trailing market leaders Kalshi and Polymarket.
With trading picking up in recent months, at October‘s pace, customer trading would reach $10.1 billion over a full year, nearly three times the pace recorded in July, according to the company reflecting Robins’ optimism: “combined with the strength of our core, we believe we are set up for an exceptional 2027.”
Customers have also increased trading combination contracts, which work much like sports betting parlays. More than 70% of DraftKings’ prediction market customers traded combination contracts in October.
Heavy prediction markets promo spending cutting into revenue
DraftKings is spending heavily to bring in new customers via promotions that offset most of the revenue it earns from trading. While prediction markets will generate hundreds of millions in gross revenue this year, the company expects the sector to contribute little to net revenue in 2026.
However, Robins believes the investment will pay off. DraftKings estimates it can recover its costs to acquire this year’s prediction market customers in about 20 months, faster than its original two-year target. In 2027, the company expects prediction market revenue to reach $650 million to $750 million.
DraftKings not overly concerned about predictions legal battle
While DraftKings spends hundreds of millions on prediction markets, the sector has an uncertain legal future as contentious battles between state gambling regulators and prediction market operators play out. It remains to be seen how courts determine whether sports event contracts fall under federal jurisdiction or are subject to state gambling laws.
DraftKings addressed what would happen if a Supreme Court ruling ended sports event contracts in the future. Robins said the company expects to have recovered its investment in customers acquired this year before July 2028. While customers acquired in 2027 would take longer to become profitable, the company estimates it could still recover those costs within four years. The company expects its prediction markets business to begin generating positive free cash flow in 2028.
Robins also believes the company can retain those customers through other products such as Pick6 and non-sports prediction markets. Nearly 20% of DraftKings Predictions customers have already traded non-sports contracts. Cryptocurrency markets account for nearly 10% of customer trading volume.
The company also views prediction markets as a way to connect with sports fans in states where traditional online sports betting remains illegal.
“I do not think we can count on every state suddenly legalizing sports betting,” Robins told analysts during the call.
Traditional sportsbook, online casino business are still growing
DraftKings’ established sports betting business had a strong third quarter despite the expensive prediction market expansion. Robins admitted that compared to prediction markets, “the sportsbook product is a better product and will attract customers and retain customers better.”
Customer wagers grew 12% year over year and sportsbook net revenue jumped 36% year over year. Robins said the results suggest that competing prediction market platforms have not noticeably hurt DraftKings’ traditional sports betting business.
The company’s online casino business also attracted more customers, with a 76% year-over-year increase in new customers. However, revenue after promotions rose just 2%.
