DraftKings executives said they have never been more confident in the company’s long-term future, even after another bad start to NFL season that cost the company roughly $300 million and forced them to lower guidance.
DraftKings reported $1.14 billion in third-quarter revenue, a 4% increase from a year ago but roughly 8% below Wall Street expectations, according to its earnings report released Thursday. The company had an EBITDA loss of $126 million, about a $70 million miss.
However, two positives largely dominated the earnings call on Friday morning, as CEO Jason Robins discussed a sports prediction markets launch and a deal with ESPN, hours after news that Penn Entertainment is terminating ESPN Bet.
“This is the most bullish I’ve ever felt about the future of DraftKings,” Robins said. “That may sound surprising given we are revising our fiscal year 2025 guidance ranges,” by 5% for revenue and 41% for EBITDA at the midpoints.
Shares closed Friday at $30.40, up 8.65%. DKNG remains down about 18% on the year in the aftermath of customer-friendly outcomes last NFL season and March Madness, but, more recently, investor unease around prediction markets.
DraftKings Predictions to launch soon
As LSR first reported last month, DraftKings plans to launch federally regulated sports prediction markets by year-end, a move Robins confirmed Friday, with the caveat that regulatory approvals could push the timeline into next year.
That would make DraftKings the first licensed sportsbook operator in the U.S. to directly compete with platforms like Kalshi and Polymarket, whose valuations have surged in the past year.
There has been no conclusive data that sports prediction markets are encroaching on sports betting, Robins clarified, as handle was up 17% year-over-year in the quarter.
Robins said the initiative isn’t meant to replace traditional betting but to expand DraftKings’ total addressable market, particularly in states like California and Texas, where sports betting remains illegal but prediction markets offer contracts on major sports under federal oversight from the CFTC. Robins added the company will be “measured” in its investment level and “not spend foolishly” until it collects more data.
DraftKings talked to concerned states
Several states where DraftKings holds sports betting licenses, including New Jersey and Nevada, have sued and issued warnings to stop prediction-market activity, arguing such products are unlicensed sports betting operating under the guise of federal derivatives oversight.
DraftKings will not offer its prediction products in any of its 30 sportsbook jurisdictions, however a growing number of those states have warned that offering prediction markets anywhere may put their betting licenses in jeopardy.
Robins said the company had lengthy discussions with regulators and policymakers before making the decision to “ensure they understood what the rationale behind it was.”
“Through the strength of those relationships and conversations, we got comfort in the approach that we’re taking,” Robins said.
ESPN deal broadens reach
Hours after Penn’s breakup with ESPN, DraftKings announced a multi-year exclusive marketing agreement with the network. Combined with its existing NBCUniversal partnership, DraftKings now covers roughly two-thirds of all NBA broadcasts, a sport Robins has repeatedly said he wants the company to “own.”
“Our new exclusive marketing agreements with ESPN and NBCUniversal will provide deeper brand affinity and broader reach, including unmatched NBA access,” Robins said. “Early indicators suggest our NBA share is significantly higher than it was at this point last year.”
He added that ESPN’s fantasy and digital reach could elevate DraftKings’ customer engagement across products, a business plan Penn could not execute.
A few games have a big impact
Sports betting revenue fell 9% to $596 million, about 16% short of analyst forecasts even with the bad NFL outcomes largely baked in.
“There is no way to describe the sports betting result in the quarter other than ugly,” Jordan Bender of Citizens said, adding that DraftKings increased promotional spend during the quarter at a much higher rate than anticipated.
A handful of NFL results dragged sportsbook hold to 5.2% during the quarter, down from 6.3% last year. Through the third-quarter hold is at 6.7%, well below its structural hold target of 11% for this year.
Robins emphasized that sports seasons don’t align neatly with fiscal quarters, leading to swings between bettor- and book-friendly outcomes. He pointed out that book-friendly results boosted Q2 revenue by about $100 million, while a few unlucky NFL Sundays wiped that out in Q3.
Had seven specific games broken even, he said, sportsbook hold would’ve been closer to 18%.
Underlying sportsbook metrics strong: analysts
Despite the hit, analysts found comfort in the underlying performance.
“Underlying metrics were strong, per usual,” Truist analyst Barry Jonas wrote, pointing to increases in betting across the company’s key offerings.
NFL handle rose 13% year-over-year and NBA handle 19%, signaling strong engagement after a summer lull in acceleration. Online casino handle also grew 25% year-over-year, the fastest pace since early 2024. Parlay handle mix also continued to surge — up roughly 8 percentage points year-over-year for NFL and 10 percentage points for NBA
“Despite the negative quarter, we are encouraged by the increasing handle trends,” Bender said, adding it “should help investors walk away with a positive from 3Q results. “
Updated guidance now includes the upcoming Missouri sportsbook launch and expected costs tied to DraftKings Predictions, which executives said may temporarily narrow margins. Still, Robins reaffirmed the company’s long-term goal of expanding sportsbook net revenue margin by more than 400 basis points since 2021, a trend he believes will continue as product mix and promo efficiency improve.
