DraftKings revenue fell in the second quarter as customer-friendly sports results and increased promotional spending outweighed strong customer growth, but the company said those investments are already showing signs of paying off ahead of the NFL season.
DraftKings generated $1.44 billion in revenue, down 5% from a year ago and below Wall Street expectations, while adjusted EBITDA fell to $115 million. Sports outcomes created an approximately $80 million revenue headwind, driven largely by the New York Knicks‘ championship run and World Cup group-stage results, which were felt by the industry at large.
At the same time, DraftKings reported it acquired nearly 75% more customers than a year ago and about 30% more than planned. The company spent 10% more than expected on acquisition, but customer acquisition costs came in approximately 25% better than anticipated. Sportsbook handle continued growing at a double-digit rate after the World Cup ended, while prediction market volume grew nearly fivefold from April to July.
DraftKings confident in second half
The early returns helped give DraftKings confidence to maintain its 2026 outlook for $6.5 billion to $6.9 billion in revenue and $700 million to $900 million in adjusted EBITDA. Management said its core business remains on pace to generate approximately $1 billion in adjusted EBITDA before prediction market investments.
“I think it’s going to be a big NFL season,” CEO Jason Robins said Friday on the company’s earnings call. “I’m expecting NFL to be really large for us, and I think we’re going to have a huge back half of the year.”
DraftKings shares initially fell after the results were released Thursday, dropping to as low as $21.40 overnight after the shares had already taken a hit from FanDuel‘s results. The stock reversed course after Friday morning’s earnings call and was up around 5% at 1:30 p.m. Eastern.
DraftKings betting growth holds up
Sportsbook handle increased 11% year over year in the second quarter, while DraftKings’ handle share across legal sportsbook states improved for a third consecutive quarter. Normalizing for sports outcomes and customer acquisition, revenue increased 10%.
The World Cup was a major source of new customers, with handle about six times higher than during the 2022 tournament and 4.5 times higher on a same-day basis. DraftKings said those customers continued betting after the tournament ended. Sportsbook handle increased 20% year over year in July following the World Cup, Robins said, with similar growth continuing into August.
DraftKings had seven consecutive months of favorable sportsbook outcomes before bettors got the better of the company in June. The Knicks’ title had an outsized impact because New York is DraftKings’ largest sportsbook state, while World Cup group-stage results also favored customers. But operator-friendly results in July helped DraftKings finish the World Cup with a hold of nearly 12% and mostly offset the June losses.
Sport results weigh on industry
The Q2 miss was largely expected given unfavorable sports outcomes, Citizens analyst Jordan Bender said. He also pointed out that DraftKings maintained its full-year guidance while several peers cut theirs, though investors may remain cautious about the amount of operating leverage needed in the fourth quarter to hit its EBITDA target.
He maintained his Market Outperform rating and $36 price target on DraftKings shares.
Truist analyst Barry Jonas was more constructive, saying buy-side expectations were likely closer to the results than Wall Street consensus suggested.
DraftKings Predictions accelerates
DraftKings is acquiring prediction market customers at costs well below what it spends to acquire sportsbook customers, according to Robins. Early volume per customer and month-over-month retention are also similar to what DraftKings sees from sportsbook customers.
Bender estimated DraftKings generated about $7 million in gross prediction market revenue during the second quarter. July consumer volume implied an annual revenue run rate of roughly $65 million, excluding revenue from its exchange and market-making operations, according to Citizens. Bender expects that volume to accelerate significantly during football season.
DraftKings launched its DKeX exchange in June and received approval in July to operate as a futures commission merchant, allowing it to move most major sports prediction volume in-house and capture more of the economics.
Prediction market revenue per customer remains lower than sportsbook revenue. However, Robins said lower acquisition costs and the economics DraftKings can capture through its brokerage, exchange and market-making businesses could eventually produce similar gross profit per customer.
Prediction markets not hurting sportsbook?
The company sees only about 1% customer overlap between its sportsbook and the largest prediction market operator in states with legal online sports betting, Robins said.
He estimates 80% to 90% of prediction market volume in those states comes from professional betting syndicates and institutional traders.
“In states that don’t [have legal sports betting], like California and Texas, we are seeing a very similar customer profile to who we get on OSB in the states that we have OSB,” Robins said.
That could make DraftKings’ existing reach more valuable in states without legal sportsbooks, where management believes it can cross-sell customers from fantasy sports, lottery and horse racing.
