DraftKings (NASDAQ:DKNG) cut its 2026 revenue and adjusted earnings outlook after stepping up investment in its Predictions offering, even as third-quarter revenue rose 16% and customer activity increased.
The sports betting and gaming company reported third-quarter revenue of $1.33 billion and an adjusted EBITDA loss of $317 million, which Chief Financial Officer Alan Ellingson said primarily reflected increased Predictions investment. Monthly unique payers rose 13% year over year to 4.1 million, while average revenue per monthly unique payer increased 3% to $109.
Chief Executive Officer and Co-Founder Jason Robins said more than 1.6 million customers had engaged with Predictions year to date. The company increased its planned 2026 adjusted EBITDA investment in the business to $650 million to $700 million, citing customer engagement and expected returns.
Lower 2026 Guidance, Higher Earnings Expected in 2027
DraftKings reduced its 2026 revenue guidance to $6.35 billion to $6.55 billion from $6.5 billion to $6.9 billion. It now expects adjusted EBITDA of $175 million to $275 million, down from its prior range of $700 million to $900 million.
Ellingson attributed the revised outlook primarily to the increased Predictions investment. DraftKings also lowered its expectation for core business adjusted EBITDA to $875 million to $925 million, from approximately $1 billion previously, reflecting additional iGaming investment and modestly customer-friendly sports outcomes.
For 2027, the company introduced revenue guidance of $7.35 billion to $7.75 billion and adjusted EBITDA guidance of $800 million to $1 billion. At the midpoints, that represents 17% revenue growth and $900 million in adjusted EBITDA.
The forecast includes $650 million to $750 million in Predictions revenue and an adjusted EBITDA investment in Predictions of $250 million to $350 million. DraftKings expects core adjusted EBITDA of $1.15 billion to $1.25 billion, with the core margin reaching approximately 18% at the midpoint.
Predictions revenue is expected to be immaterial in 2026 because new-customer promotions will offset most gross revenue, Ellingson said. Robins said the business would generate hundreds of millions of dollars in gross revenue this year but close to neutral net revenue.
Predictions Growth and Regulatory Risk
Robins said DraftKings’ 2026 Predictions customer cohort was on track to pay back its acquisition costs in approximately 20 months, below the company’s two-year target. He said retention and engagement among newly acquired Predictions customers were in line with Sportsbook levels.
Annualized consumer volume on Predictions reached $10.1 billion in October, nearly triple the July level, while annualized total volume traded reached $56.8 billion, more than five times its July level, Robins said. He described DraftKings as the third-largest Predictions exchange by total volume.
Robins said DraftKings was weighing the risk that sports event contracts could be discontinued as courts consider the regulatory landscape. Under a scenario in which those contracts end in July 2028, the company estimates its 2026 cohort would have paid back by then and its 2027 cohort would pay back within four years, partly through customers’ use of other products.
Robins acknowledged that outcomes between the continuation and elimination of all sports event contracts were possible. He also said the company would monitor regulatory developments when deciding how much to invest. DraftKings expects Predictions to provide an adjusted EBITDA tailwind in 2028, Ellingson said.
Nearly 20% of Predictions customers had traded non-sports markets, according to Robins. He said crypto was approaching a double-digit share of total consumer volume in recent weeks and that the company was targeting a migration of crypto markets to its DKeX exchange over the following month.
Sportsbook and iGaming Trends
Sportsbook net revenue grew 36% year over year in the third quarter, with handle up 12% and net revenue margin expanding approximately 120 basis points to 6.4%. Robins said a World Cup boost was fully offset by one fewer week of college football and NFL games, and he saw no discernible impact from prediction market operators on the Sportsbook business.
In iGaming, customer acquisition rose 76% year over year. Gross revenue increased 7%, while net revenue rose 2% as DraftKings invested in promotions. Robins said October gross revenue growth accelerated to 12% and paid active days increased 24% year over year.
DraftKings said adjusted operating expenses excluding Predictions declined year over year in the third quarter. Robins expects overall marketing spending to fall in 2027 despite a modest increase in Predictions marketing, while efficiencies in the core business support margin growth.
The company maintained approximately $1.1 billion in cash through the investment cycle and expects significant excess free cash flow in 2027 after funding Predictions, Ellingson said.
About DraftKings (NASDAQ:DKNG)
DraftKings Inc is a digital sports entertainment and gaming company that operates online and mobile platforms for sports betting, casino gaming and daily fantasy sports. Its offerings include the DraftKings Sportsbook, DraftKings Casino and daily fantasy contests covering a range of professional and collegiate sports.
The company also provides related entertainment and media content through DraftKings Network, along with free-to-play games, promotions and other interactive products designed to complement its sports and gaming platforms.
