DraftKings Cuts Its Profit Outlook by More Than Two-Thirds for a Predictions Bet

DraftKings cut its full-year profit outlook sharply on Thursday, choosing to pour $650 million to $700 million into Predictions, its prediction-market offering.

DraftKings reported third-quarter revenue of $1.33 billion, up 16% from $1.14 billion a year earlier. The growth missed the $1.39 billion analysts polled by FactSet expected.

The reported net loss widened to $468.7 million, or $0.94 a share, from $256.8 million, or $0.52 a share, a year earlier. Analysts polled by FactSet had expected a loss of $0.41 a share.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of $316.9 million, against a loss of $126.5 million a year earlier. The adjusted loss per share was $0.53, against $0.26.

The core business kept growing

Sports revenue rose 31.5% to $783.6 million. DraftKings defines sports revenue to include prediction markets alongside its online and retail sportsbooks, so the line blends the new offering with the established one.

Sports consumer volume, the settled wagers and prediction-market trades the company counts, rose 21.9% to $13.9 billion. The sports net revenue margin improved to 5.6% from 5.2%.

iGaming revenue rose 2.1% to $460.9 million, and other revenue fell 12.5% to $84.5 million. Monthly unique payers rose about 13% to 4.1 million, and average revenue per payer rose about 3% to $109.

The wider loss came through costs, not demand. Sales and marketing spending rose 68% to $605.7 million, and the operating loss widened to $493.1 million from $271.9 million.

The outlook cut is a spending decision

For the full year, DraftKings now expects revenue of $6.35 billion to $6.55 billion, down from $6.5 billion to $6.9 billion in its second-quarter outlook. Its adjusted EBITDA outlook fell to $175 million to $275 million, from $700 million to $900 million.

The arithmetic is the strategy. The company expects adjusted EBITDA from its core business of $875 million to $925 million, against a Predictions investment of $650 million to $700 million.

At the midpoints, $900 million of core profit minus $675 million of Predictions spending lands on the new outlook's $225 million midpoint (TickerGrove calculation).

Predictions revenue will be immaterial in 2026, the company said, because new-customer promotions will offset most of the gross revenue it generates. Of the year's investment, $175 million to $225 million falls in the fourth quarter.

"The third quarter marked a pivotal moment for DraftKings, as the Predictions offering we have been building is now powering meaningful growth for our business," chief executive Jason Robins said in the release. More than 1.6 million customers have used Predictions this year.

"Our core business continues to generate significant free cash flow, which we are deploying to fund growth in our Predictions business at attractive payback periods," chief financial officer Alan Ellingson said.

The spending race is industry-wide. Rival Flutter, which operates FanDuel, said this week that prediction-market marketing had driven up advertising costs, the Wall Street Journal reported.

In a shareholder letter reported by Barron's, Robins said DraftKings has become the third-largest Predictions exchange by total volume, behind Kalshi and Polymarket.

2027 is the year management points to

DraftKings introduced a 2027 outlook of revenue of $7.35 billion to $7.75 billion, up 17% at the midpoint from the 2026 guide, and adjusted EBITDA of $800 million to $1.0 billion.

Inside it, the core business is expected to produce revenue of $6.7 billion to $7.0 billion and adjusted EBITDA of $1.15 billion to $1.25 billion. Predictions is expected to contribute revenue of $650 million to $750 million, with investment easing to $250 million to $350 million.

Cash and equivalents stood at $1.1 billion on September 30. Operating cash flow for the first nine months of the year was $63.0 million, down from $342.4 million a year earlier, the comparison the release's cash-flow statement supports.

Investors sold the trade-off

DraftKings shares dropped 24% to $17.81 in after-hours trading on Thursday after the results, the Wall Street Journal reported. That is an after-hours snapshot, not a closing price.

What remains unknown

How much revenue Predictions itself produced in the third quarter. The release folds prediction markets into its sports lines and discloses no standalone figure, so the offering's own traction cannot be separated from the sportsbook's.

Whether the legal ground under sports event contracts holds. Barron's reported the Supreme Court is being asked to review a dispute over who regulates sports event contracts, and the release does not quantify DraftKings' exposure if they are restricted.

Whether the fourth-quarter Predictions investment stays inside its $175 million to $225 million range. The full-year outlook the company just cut depends on it.

What to watch next

Management's conference call on Friday, November 6, at 8:30 a.m. ET, the first chance to press for standalone Predictions figures.

Friday's first regular-session close, which will replace the after-hours snapshot as the settled market verdict.

The fourth-quarter print, measured against the $175 million to $275 million full-year adjusted EBITDA outlook the spending decision produced.