DraftKings Cuts Guidance to Fund Prediction Markets

DraftKings has slashed its 2026 profit forecast to pay for its prediction market business, cutting full-year Adjusted EBITDA guidance to $175m-$275m from the $700m-$900m it held three months ago. The Boston operator behind the DraftKings sportsbook and casino now expects to spend $650m-$700m of Adjusted EBITDA on Predictions this year, its brand for federally regulated event contracts.

The numbers came with its third quarter results on Thursday, November 5. Revenue rose 16% to $1,329 million, but the bigger story was the bill for signing up customers to a product the company expects to earn almost nothing this year.

The Guidance Before and After

The revenue range came down too. DraftKings now expects 2026 revenue of $6.35bn-$6.55bn, against the $6.5bn-$6.9bn it was “maintaining” when it reported its second quarter on August 6.

Strip out Predictions and the picture is steadier. DraftKings expects its core business to earn $875m-$925m of Adjusted EBITDA in 2026, a figure that also absorbs extra iGaming spending and what it called “modestly customer-friendly sport outcomes”. Predictions will cost $175m-$225m more in the fourth quarter alone, and its revenue this year will be immaterial because new-customer promotions eat most of what it earns.

A First Look at 2027

The company also put out 2027 guidance for the first time. It expects revenue of $7.35bn-$7.75bn and Adjusted EBITDA of $800m to $1.0bn, with $650m-$750m of that revenue coming from Predictions and the spend on it falling to $250m-$350m. Core Adjusted EBITDA is penciled in at $1.15bn-$1.25bn.

A Quarter Paid for in Marketing

The quarterly loss shows where the money went. DraftKings lost $468.7 million, or 94 cents a share, against $256.8 million, or 52 cents, a year earlier. Sales and marketing costs climbed to $605.7 million from $360.4 million, and Adjusted EBITDA swung to a loss of $316.9 million from a $126.5 million loss.

Sports revenue, which now counts prediction markets alongside online sports betting, rose 31.5% to $783.6 million on $13.9 billion of settled wagers and trades. iGaming was close to flat, up 2.1% to $460.9 million, and the shareholder letter says that was by design, as the company spent on promotions to bring in new casino players. Monthly unique payers grew about 13% to 4.1 million.

The Sportsbook Holds Up

DraftKings used the letter to argue the core is not being eaten by prediction markets. Sportsbook handle grew 12%, net revenue margin widened to 6.4%, and hold passed 11%. The company says prediction market operators are having “no discernible impact” on its sportsbook business, which is live in 27 states, Washington, D.C., and Puerto Rico, and in Canadian provinces covering about 51% of the population, home to the DraftKings Ontario app.

What DraftKings Says It Is Buying

Chief executive Jason Robins framed the quarter as a turning point. “The third quarter marked a pivotal moment for DraftKings, as the Predictions offering we have been building is now powering meaningful growth for our business,” he said. “More than 1.6 million customers have engaged with Predictions year-to-date.”

The letter puts numbers on the bet. DraftKings says its DKeX exchange earned a take rate of about 11.1% on trades in September and October, and that it kept roughly two-thirds of that gross revenue, with outside market makers getting the rest. Predictions consumer volume in October ran at an annualized $10.1 billion, and combos made up 27% of it. That’s the same DKeX exchange behind the NFL season fee estimates earlier this fall.

A Hedge Against the Courts

It also says the 2026 customer cohort should pay back in about 20 months. Then comes the line that shows how much rides on the legal fight. “Even if sports contracts were to end in July 2028,” DraftKings estimates this year’s cohort would be fully paid back before that date. That risk hangs over the whole DraftKings and FanDuel prediction pivot, and DraftKings says it will adjust its Predictions spending as regulation develops.

Investors Didn’t Buy It

The market’s answer was quick. The stock tanked 24% in after-hours trading on Thursday, CNBC reported, with the 94-cent loss far wider than the 39-cent loss analysts polled by LSEG expected and revenue short of the $1.40 billion estimate. On Friday the shares fell as much as 29%, according to Bloomberg.

Chief financial officer Alan Ellingson said the core business “continues to generate significant free cash flow”, and that cash is now going into Predictions. DraftKings expects Predictions to add to Adjusted EBITDA in 2028. Until then, the price of a seat in prediction markets is $650m-$700m this year, and a 2026 profit forecast cut by more than two-thirds.