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Can DKNG's Vertical Integration Unlock a 30% Adjusted EBITDA Margin?
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Key Takeaways
DraftKings has brought Predictions brokerage, exchange and market-making capabilities in-house.
More DKeX volume could let DraftKings retain additional exchange fees and strengthen unit economics.
DraftKings expects Predictions investment of $200M-$300M in 2026 as it builds the platform.
DraftKings Inc. (DKNG - Free Report) is advancing its vertical integration strategy in Predictions as it works toward a long-term companywide adjusted EBITDA margin target of at least 30%. The strategy centers on bringing key platform capabilities in-house to increase profit generated per customer and strengthen control over product development.
DraftKings launched its DKeX exchange in June 2026 and obtained Futures Commission Merchant approval in July. The company now operates the brokerage, exchange and market-making components of Predictions internally. This structure allows DraftKings to capture more of the economics across the Predictions platform while supporting broader content offerings and improvements to the customer experience.
The approach builds on DraftKings’ experience in Sportsbook, where approximately 95% of sports content is priced and traded in-house. Internal capabilities have enabled the company to retain more value and develop differentiated products. DraftKings expects to apply the same approach to Predictions, using greater product control to improve retention and monetization over time.
The monetization profile could improve further as DraftKings routes more volume through DKeX and retains more exchange fees. The company expects this transition to support unit economics through 2026 and into 2027. Although Predictions is expected to generate lower revenue per customer than Sportsbook, its higher-margin profile could support comparable gross profit per customer over time. Near-term spending remains significant, with $200 million to $300 million of Predictions investment expected in 2026.
DraftKings’ expanding in-house capabilities and established Sportsbook experience could support progress toward its long-term companywide adjusted EBITDA margin target of at least 30%. However, continued investment needs and regulatory uncertainty could influence the pace of improvement. With the company expecting stronger unit economics as more volume moves through DKeX, customer monetization and spending discipline will likely remain key considerations in translating the benefits into margin improvement.
DKNG’s Price Performance, Valuation & Estimates
DraftKings’ shares have declined 12.6% in the past three months compared with the industry’s 9.7% fall. In the same time frame, other industry players like Accel Entertainment, Inc. (ACEL - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and PENN Entertainment, Inc. (PENN - Free Report) have declined 14.7%, 16% and 21.3%, respectively.
DKNG Three-Month Price Performance
Image Source: Zacks Investment Research
DKNG stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.46, below the industry average of 1.79. Conversely, industry players, such as Accel Entertainment, PENN Entertainment and Boyd Gaming, have P/S ratios of 0.64, 0.28 and 1.26, respectively.
DKNG’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DraftKings’ 2026 earnings per share has declined in the past 60 days.
EPS Trend of DKNG Stock
Image Source: Zacks Investment Research
The company is likely to report solid earnings, with projections indicating a 50% surge in 2026. Conversely, industry players like Accel Entertainment and PENN Entertainment are likely to witness a rise of 15% and 117.5%, respectively, year over year in 2026 earnings. Meanwhile, BYD’s 2026 earnings are expected to decline 3.1% year over year.
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Can DKNG's Vertical Integration Unlock a 30% Adjusted EBITDA Margin?
Key Takeaways
DraftKings Inc. (DKNG - Free Report) is advancing its vertical integration strategy in Predictions as it works toward a long-term companywide adjusted EBITDA margin target of at least 30%. The strategy centers on bringing key platform capabilities in-house to increase profit generated per customer and strengthen control over product development.
DraftKings launched its DKeX exchange in June 2026 and obtained Futures Commission Merchant approval in July. The company now operates the brokerage, exchange and market-making components of Predictions internally. This structure allows DraftKings to capture more of the economics across the Predictions platform while supporting broader content offerings and improvements to the customer experience.
The approach builds on DraftKings’ experience in Sportsbook, where approximately 95% of sports content is priced and traded in-house. Internal capabilities have enabled the company to retain more value and develop differentiated products. DraftKings expects to apply the same approach to Predictions, using greater product control to improve retention and monetization over time.
The monetization profile could improve further as DraftKings routes more volume through DKeX and retains more exchange fees. The company expects this transition to support unit economics through 2026 and into 2027. Although Predictions is expected to generate lower revenue per customer than Sportsbook, its higher-margin profile could support comparable gross profit per customer over time. Near-term spending remains significant, with $200 million to $300 million of Predictions investment expected in 2026.
DraftKings’ expanding in-house capabilities and established Sportsbook experience could support progress toward its long-term companywide adjusted EBITDA margin target of at least 30%. However, continued investment needs and regulatory uncertainty could influence the pace of improvement. With the company expecting stronger unit economics as more volume moves through DKeX, customer monetization and spending discipline will likely remain key considerations in translating the benefits into margin improvement.
DKNG’s Price Performance, Valuation & Estimates
DraftKings’ shares have declined 12.6% in the past three months compared with the industry’s 9.7% fall. In the same time frame, other industry players like Accel Entertainment, Inc. (ACEL - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and PENN Entertainment, Inc. (PENN - Free Report) have declined 14.7%, 16% and 21.3%, respectively.
DKNG Three-Month Price Performance
Image Source: Zacks Investment Research
DKNG stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.46, below the industry average of 1.79. Conversely, industry players, such as Accel Entertainment, PENN Entertainment and Boyd Gaming, have P/S ratios of 0.64, 0.28 and 1.26, respectively.
DKNG’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DraftKings’ 2026 earnings per share has declined in the past 60 days.
EPS Trend of DKNG Stock
Image Source: Zacks Investment Research
The company is likely to report solid earnings, with projections indicating a 50% surge in 2026. Conversely, industry players like Accel Entertainment and PENN Entertainment are likely to witness a rise of 15% and 117.5%, respectively, year over year in 2026 earnings. Meanwhile, BYD’s 2026 earnings are expected to decline 3.1% year over year.
DKNG stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.