Wall Street analysts are trimming first-quarter estimates for DraftKings and FanDuel parent Flutter Entertainment, warning that softening sports betting handle will drag on earnings even as underlying revenue holds closer to expectations.
Stifel and Citizens JMP Securities each forecast adjusted EBITDA misses for the two leading U.S. sports betting operators, as mounting investment costs and stalled handle growth collide with investor anxiety over prediction markets. Both firms argue the slowdown reflects tough year-over-year comparisons more than any structural threat from Kalshi or Polymarket, however.
Shares of DraftKings (DKNG) and Flutter (FLUT) are each down roughly 40% year-to-date.
Handle drop collides with investment
U.S. sports betting handle across the 32 states that report publicly fell 3.3% year-over-year from January through February, according to LSR’s analysis of state gaming data. A year earlier, handle was up 8.7% over that same stretch, after years of consistent double-digit growth, a reversal sharp enough to dominate analyst questions on both companies’ most recent earnings calls.
Stifel estimates same-state handle is running down about 2% year-over-year quarter-to-date, consistent with the December exit rate. Citizens models DraftKings handle up 3% year-over-year versus consensus of up 5%, and FanDuel‘s down 8% versus consensus of down 5%.
Both companies are also absorbing approximately $20 million from their Arkansas sports betting launch, that does not appear reflected in current Street estimates.
Citizens models $200 million in all-in prediction markets spend for DraftKings this year, while Flutter has guided to $300 million for FanDuel Predicts. DraftKings has estimated margins on the product could run 10% to 30% higher than on traditional sports betting, as prediction markets bypass the state gaming taxes and regulations, the subject of an escalating legal war between states and the federal government.
DraftKings earnings suffer from comps
The handle weakness looks more cyclical than structural. Stifel points to tough comparisons from last year’s March Madness, when bettor-friendly outcomes drove elevated winnings that generated more betting.
Industry gaming margins exceeded 10% for four consecutive months through February, only the second time that has ever happened, according to Citizens. Net gaming revenue is broadly pacing in line with already-reset full-year guidance at both operators, Stifel said.
Both banks pushed back on the idea that Kalshi and Polymarket are meaningfully siphoning business from the major operators. Stifel estimates prediction markets are affecting handle by only a low-single-digit percentage, with minimal revenue impact given the fundamental difference in economics. Platforms like Kalshi earn roughly 1% to 1.5% in trading fees versus sportsbook hold rates of 7% or higher.
Stifel suggests proposed formal rulemaking from the Commodities Futures Trading Commission could restrict prediction markets from offering player props later this year, a risk not currently priced into valuations. A recent Louisiana legislative analysis estimated that player props account for roughly 40% of sportsbook revenue. They are also a key driver of same-game parlay adoption.
Rest of 2026 carries promise and risk
Citizens expects 55% and 63% of full-year EBITDA to land in the fourth quarter for DraftKings earnings and Flutter respectively, leaving both exposed if handle does not accelerate.
The World Cup, kicking off in June, could generate a Super Bowl-sized $1.7 billion in U.S. betting handle per Citizens, though the impact depends heavily on how far the U.S. men’s national team advances. A deep run would drive wagering but pressure margins through worse gaming outcomes. An early exit is cleaner for EBITDA.
DraftKings reports first-quarter results April 30. Flutter reports May 6.
