DraftKings delivered its most profitable quarter ever to start 2025, notching $102.6 million in adjusted EBITDA in Q1 — a 358% year-over-year increase — despite a historically “customer-friendly” March Madness.
DraftKings reported $1.41 billion in revenue, up 20% from the first quarter of 2024. Sportsbook handle rose 16% to $13.9 billion, with NCAA basketball and the Super Bowl driving activity, according to the report. Still, an 82% win rate by higher seeds in the men’s March Madness bracket reduced the percentage of dollars DraftKings keeps after paying out bets to 9.5%, below its structural hold.
DKNG was up 3% Friday afternoon following the company’s earnings call, trading at $36.41 on roughly 1.5x its average daily volume.
DraftKings trims revenue guidance
Profit rose despite unfavorable betting outcomes thanks to gains in structural hold, promotional discipline, and improved promotional and cost efficiency, according to management. Structural sportsbook hold increased 0.5 percentage points year over year to 10.4%, driven by a 3.7 percentage point rise in parlay mix.
“If not for customer-friendly sport outcomes in March, we would be raising our fiscal year 2025 revenue and adjusted EBITDA guidance,” DraftKings CEO Jason Robins said on the investor call.
Instead, DraftKings lowered its full-year revenue forecast by $200 million and adjusted EBITDA forecast by $100 million at the midpoint, citing the impact of unfavorable results as well as several regulatory changes.
Live betting surges past 50% of handle
Robins said Q1 marked the first time in company history that in-play wagers accounted for more than half of total sportsbook handle. Live betting was up 36% year over year in Major League Baseball, which helped keep more money on the platform.
Driving that growth were the early returns from acquisitions of Sports IQ and Simplebet last year, which now power DraftKings’ in-house live betting engine.
“I really think this past quarter was the first time I had felt like, wow, I’m actually really seeing impact on the live side start to materialize in the way that we had planned, and that was exciting to see,” Robins said.
Hit from sports results, state changes
Customer-friendly outcomes shaved an estimated $170 million off revenue and $111 million off adjusted EBITDA through the end of April, executives said. Maryland’s recent proposed sports betting tax hike and Jackpocket’s exit from Texas and New Mexico are estimated to impose an additional $30 million headwind on full-year revenue.
Still, DraftKings raised internal projections for gross margin and reiterated confidence in its underlying business. Average promotional spending declined as a percentage of gross gaming revenue, while sportsbook net revenue margin improved to 6.4%, up from 6.1% in Q1 2024.
Online lottery boosts user growth
Monthly unique payers rose 28% to 4.3 million in Q1, driven in large part by DraftKings’ $750 million acquisition of online lottery courier Jackpocket last year. Jackpocket accounted for more than half of the year-over-year MUP growth.
But because Jackpocket customers tend to spend less than traditional sportsbook or iCasino customers, its inclusion pulled average revenue per monthly unique payer down 5% to $108. Excluding Jackpocket users, ARPMUP rose 7%.
DraftKings expects Jackpocket to generate $260 million to $340 million in incremental revenue and $60 million to $100 million in adjusted EBITDA by fiscal year 2026. However, the company noted this year’s contribution will be “about breakeven,” with Texas’ recent ban of lottery couriers weighing on performance.
“It’s still growing very quickly, even with Texas, so I think [there’s] a lot of opportunity on that front,” Robins said. “We want to make sure we’re properly investing in it, too.”
Capital strategy and policy outlook
DraftKings repurchased 3.7 million shares in Q1 and ended the quarter with $1.1 billion in cash. Robins said the company expects to generate about $750 million in free cash flow this year.
Robins also addressed federal regulatory developments, telling investors that while prediction markets haven’t yet triggered sports betting legalization, they may become a “powerful lever” to drive states like California. He said DraftKings is closely monitoring the space.
Executives reaffirmed that US expansion remains the priority over international M&A, though they left the door open for global opportunities “under the right conditions.”
