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DKNG Q3 Earnings Call Highlights Predictions Spending and 2027 Outlook
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Key Takeaways
DraftKings reports a wider Q3 loss despite 16% revenue growth, with sales falling 3.8% short of estimates.
DKNG cuts 2026 EBITDA guidance amid $650-$700M in Predictions investment, targeting growth in 2027.
Sportsbook revenues jump 36%, while DraftKings targets $1.15-$1.25B in core adjusted EBITDA for 2027.
DraftKings Inc. (DKNG - Free Report) emphasized aggressive investment in prediction markets during its third-quarter 2026 earnings call, despite wider losses and earnings falling short of expectations.
Management defended elevated customer acquisition spending while outlining expectations for stronger growth in 2027. Regulatory uncertainty, customer payback periods and the profitability of its core Sportsbook and iGaming businesses dominated analyst discussions.
DraftKings reported an adjusted loss of 53 cents per share, wider than the Zacks Consensus Estimate of a loss of 21 cents. The adjusted loss also widened from 26 cents in the year-ago quarter.
Quarterly revenues increased 16% year over year to $1.33 billion but missed the Zacks Consensus Estimate of $1.38 billion.
Chief financial officer Alan Ellingson attributed revenue growth to stronger customer engagement and improved Sportsbook margins. Monthly unique payers increased 13% to 4.1 million, while average revenue per payer rose 3% to $109.
DraftKings lowered fiscal 2026 revenue guidance to $6.35-$6.55 billion from $6.5-$6.9 billion. Adjusted EBITDA guidance declined to $175-$275 million from $700-$900 million.
Ellingson attributed the revision primarily to increased Predictions investment of $650-$700 million. Core adjusted EBITDA is now expected between $875 million and $925 million.
For fiscal 2027, management introduced revenue guidance of $7.35-$7.75 billion and adjusted EBITDA guidance of $800 million-$1 billion. Predictions revenue is expected to reach $650-$750 million.
DKNG Defends Customer Acquisition Spending
Chief executive officer Jason Robins highlighted that more than 1.6 million customers engaged with Predictions year to date, supporting management's decision to accelerate investment.
Robins expects approximately 20-month payback periods for the 2026 customer cohort, compared with the company's two-year target.
During questions from BofA Securities and Morgan Stanley analysts, Robins defended elevated acquisition spending, emphasizing customer retention and expected lifetime returns rather than quarterly active customer counts alone.
DraftKings Addresses Regulatory Risks and Returns
Regulatory uncertainty surrounding sports event contracts emerged as a central concern during analyst questioning.
Responding to Jefferies and UBS analysts, Robins explained that management evaluated outcomes involving continued operations or the potential elimination of sports contracts in July 2028.
He maintained that cross-selling into non-sports Predictions, Pick6 and lottery products could preserve customer value. Under the adverse scenario discussed, management expects its 2027 customer cohort to achieve payback within four years.
DKNG Highlights Sportsbook and iGaming Momentum
Sportsbook net revenue increased 36% year over year, supported by 12% handle growth and approximately 120 basis points of net revenue margin expansion.
Robins emphasized stronger parlay participation and continued market share gains, while maintaining that prediction market competitors had not materially affected Sportsbook demand.
In iGaming, customer acquisition surged 76%, while net revenue increased 2%. Addressing Barclays' questions, Robins explained that promotional spending accompanied stronger customer acquisition and should support future revenue growth.
DraftKings Targets Core Profitability and Cash Flow
Management expects core adjusted EBITDA of $1.15-$1.25 billion in fiscal 2027, supported by marketing efficiencies and operating leverage.
Ellingson projected core adjusted EBITDA margin of approximately 18% in 2027, representing roughly 360 basis points of expansion from the 2026 guidance midpoint.
Robins emphasized maintaining financial flexibility, with approximately $1.1 billion in cash. Management expects significant excess free cash flow in 2027 and anticipates Predictions generating free cash flow in 2028.
DKNG Balances Expansion With Profitability Discipline
Management's overall commentary reflected confidence in Predictions customer economics alongside recognition of substantial near-term investment requirements and regulatory uncertainty.
Robins emphasized customer acquisition opportunities and cross-selling, while Ellingson highlighted cost discipline and expanding core profitability. The company's near-term priorities remain funding Predictions growth while preserving financial strength.
DraftKings Zacks Rank and Style Scores Signal Mixed Prospects
DraftKings currently carries a Zacks Rank #3 (Hold), reflecting a neutral near-term outlook under the earnings estimate revision-based ranking system. Its Growth Score of B indicates relatively favorable growth characteristics, while its Value Score of D reflects weaker valuation characteristics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Momentum Score of C and combined VGM Score of C indicate middle-range characteristics. This combination falls outside the preferred pairing of a Zacks Rank #1 or #2 (Buy) with A- or B-rated Style Scores. The Zacks Rank may change as analysts revise earnings estimates following the recently reported results.
View the Zacks #1 Rank List
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DKNG Q3 Earnings Call Highlights Predictions Spending and 2027 Outlook
Key Takeaways
DraftKings Inc. (DKNG - Free Report) emphasized aggressive investment in prediction markets during its third-quarter 2026 earnings call, despite wider losses and earnings falling short of expectations.
Management defended elevated customer acquisition spending while outlining expectations for stronger growth in 2027. Regulatory uncertainty, customer payback periods and the profitability of its core Sportsbook and iGaming businesses dominated analyst discussions.
DKNG Misses Zacks Estimates Despite Revenue Growth
DraftKings reported an adjusted loss of 53 cents per share, wider than the Zacks Consensus Estimate of a loss of 21 cents. The adjusted loss also widened from 26 cents in the year-ago quarter.
Quarterly revenues increased 16% year over year to $1.33 billion but missed the Zacks Consensus Estimate of $1.38 billion.
DraftKings Inc. Price, Consensus and EPS Surprise
DraftKings Inc. price-consensus-eps-surprise-chart | DraftKings Inc. Quote
Chief financial officer Alan Ellingson attributed revenue growth to stronger customer engagement and improved Sportsbook margins. Monthly unique payers increased 13% to 4.1 million, while average revenue per payer rose 3% to $109.
DraftKings Cuts 2026 Guidance Amid Predictions Investment
DraftKings lowered fiscal 2026 revenue guidance to $6.35-$6.55 billion from $6.5-$6.9 billion. Adjusted EBITDA guidance declined to $175-$275 million from $700-$900 million.
Ellingson attributed the revision primarily to increased Predictions investment of $650-$700 million. Core adjusted EBITDA is now expected between $875 million and $925 million.
For fiscal 2027, management introduced revenue guidance of $7.35-$7.75 billion and adjusted EBITDA guidance of $800 million-$1 billion. Predictions revenue is expected to reach $650-$750 million.
DKNG Defends Customer Acquisition Spending
Chief executive officer Jason Robins highlighted that more than 1.6 million customers engaged with Predictions year to date, supporting management's decision to accelerate investment.
Robins expects approximately 20-month payback periods for the 2026 customer cohort, compared with the company's two-year target.
During questions from BofA Securities and Morgan Stanley analysts, Robins defended elevated acquisition spending, emphasizing customer retention and expected lifetime returns rather than quarterly active customer counts alone.
DraftKings Addresses Regulatory Risks and Returns
Regulatory uncertainty surrounding sports event contracts emerged as a central concern during analyst questioning.
Responding to Jefferies and UBS analysts, Robins explained that management evaluated outcomes involving continued operations or the potential elimination of sports contracts in July 2028.
He maintained that cross-selling into non-sports Predictions, Pick6 and lottery products could preserve customer value. Under the adverse scenario discussed, management expects its 2027 customer cohort to achieve payback within four years.
DKNG Highlights Sportsbook and iGaming Momentum
Sportsbook net revenue increased 36% year over year, supported by 12% handle growth and approximately 120 basis points of net revenue margin expansion.
Robins emphasized stronger parlay participation and continued market share gains, while maintaining that prediction market competitors had not materially affected Sportsbook demand.
In iGaming, customer acquisition surged 76%, while net revenue increased 2%. Addressing Barclays' questions, Robins explained that promotional spending accompanied stronger customer acquisition and should support future revenue growth.
DraftKings Targets Core Profitability and Cash Flow
Management expects core adjusted EBITDA of $1.15-$1.25 billion in fiscal 2027, supported by marketing efficiencies and operating leverage.
Ellingson projected core adjusted EBITDA margin of approximately 18% in 2027, representing roughly 360 basis points of expansion from the 2026 guidance midpoint.
Robins emphasized maintaining financial flexibility, with approximately $1.1 billion in cash. Management expects significant excess free cash flow in 2027 and anticipates Predictions generating free cash flow in 2028.
DKNG Balances Expansion With Profitability Discipline
Management's overall commentary reflected confidence in Predictions customer economics alongside recognition of substantial near-term investment requirements and regulatory uncertainty.
Robins emphasized customer acquisition opportunities and cross-selling, while Ellingson highlighted cost discipline and expanding core profitability. The company's near-term priorities remain funding Predictions growth while preserving financial strength.
DraftKings Zacks Rank and Style Scores Signal Mixed Prospects
DraftKings currently carries a Zacks Rank #3 (Hold), reflecting a neutral near-term outlook under the earnings estimate revision-based ranking system. Its Growth Score of B indicates relatively favorable growth characteristics, while its Value Score of D reflects weaker valuation characteristics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Momentum Score of C and combined VGM Score of C indicate middle-range characteristics. This combination falls outside the preferred pairing of a Zacks Rank #1 or #2 (Buy) with A- or B-rated Style Scores. The Zacks Rank may change as analysts revise earnings estimates following the recently reported results.