DraftKings shares drop 21.3% after Q3 revenue miss

Shares fell 21.3% at 3:59 p.m. ET, from a $23.52 close.

DraftKings (DKNG) reported third-quarter revenue of $1.33 billion, up 16% from a year earlier, missing the $1.43 billion consensus. Adjusted loss per share was 53 cents, wider than the 39 cents consensus.

DraftKings cut its fiscal 2026 forecast. Revenue guidance is now $6.35 billion to $6.55 billion, down from $6.5 billion to $6.9 billion. Adjusted EBITDA guidance is $175 million to $275 million, down from $700 million to $900 million.

Here's how the company did:

• Revenue: $1.33 billion vs. $1.14 billion a year earlier, $1.43 billion expected
• Adjusted loss per share: 53 cents vs. 26 cents a year earlier, 39 cents expected
• Net loss attributable to common stockholders: $468.7 million vs. $256.8 million a year earlier

GAAP loss per share was 94 cents, compared with 52 cents a year earlier.

Net income swung from a profit of $21.1 million in the first quarter of 2026 to a loss of $67.6 million in the second quarter of 2026.

Revenue growth was driven primarily by continued healthy customer engagement and a higher Sportsbook net revenue margin.

Here's how DraftKings segments did during the quarter:

• Sports revenue: $783.6 million, up 31.5% from a year earlier
• iGaming revenue: $460.9 million, up 2.1%
• Other revenue: $84.5 million, down 12.5%

2026 guidance

The change reflects an increased Adjusted EBITDA investment in Predictions of $650 million to $700 million.

Core-business Adjusted EBITDA is expected at $875 million to $925 million for fiscal 2026, reflecting further investment in iGaming growth and modestly customer-friendly sports outcomes.

Predictions revenue will be immaterial in fiscal 2026. Adjusted EBITDA investment in Predictions is expected to be $175 million to $225 million in the fourth quarter.

CFO Alan Ellingson said the core business "continues to generate significant free cash flow, which we are deploying to fund growth in our Predictions business at attractive payback periods."

2027 outlook

For fiscal 2027, the company is introducing revenue guidance of $7.35 billion to $7.75 billion and Adjusted EBITDA guidance of $800 million to $1.0 billion. The revenue midpoint is up 17% year over year.

The company expects core-business revenue of $6.7 billion to $7.0 billion and core-business Adjusted EBITDA of $1.15 billion to $1.25 billion.

Predictions revenue is expected at $650 million to $750 million, with Adjusted EBITDA investment of $250 million to $350 million.

Segment results

Monthly Unique Payers rose about 13% to 4.1 million in the quarter.

Average revenue per MUP increased about 3%, or $3, to $109.

Sports net revenue margin was 5.6%, compared with 5.2% a year earlier. Sports consumer volume reached $13.90 billion, up 21.9%.

More than 1.6 million customers have engaged with Predictions so far this year.

DraftKings is live with mobile sports betting in 27 states, Washington, D.C., and Puerto Rico, representing about 53% of the U.S. population. It is live with iGaming in five states, representing about 11%.

Costs and charges

Adjusted EBITDA was a loss of $316.9 million, compared with a loss of $126.5 million a year earlier.

Sales and marketing expense was $605.7 million, up from $360.4 million a year earlier.

Advocacy and other related legal expenses were $12.8 million, primarily in pursuit of legalization of its offerings, including iGaming legislation and support for a Sportsbook ballot measure.