The business actually grew. What spooked investors was how much money DraftKings is pouring into Predictions, its prediction market product, and what that did to this year’s profit outlook.
Key Takeaways
- Q3 revenue rose 16% to $1.329 billion, but missed Wall Street’s target by about $60 million
- DraftKings now plans to spend $650 million to $700 million on Predictions this year, and cut 2026 adjusted EBITDA guidance to $175 million to $275 million from $700 million to $900 million
- Management says profits return in 2027, when it expects adjusted EBITDA of $800 million to $1 billion
The Quick Numbers
| Metric | Q3 2026 | Q3 2025 |
|---|---|---|
| Revenue | $1.329 billion | $1.144 billion |
| Net loss | $468.7 million | $256.8 million |
| Adjusted EBITDA | -$316.9 million | -$126.5 million |
| Monthly unique payers | 4.1 million | About 3.6 million |
Revenue was up 16%, which sounds good until you see it came in about $60 million short of what Wall Street wanted. The adjusted loss per share was 53 cents, also worse than expected.
The sportsbook looked pretty good. Net revenue there was up 36%, mostly because DraftKings held more of what people bet. iGaming barely budged, up around 2%.
The Predictions Bet
DraftKings now says it will spend $650 million to $700 million on Predictions this year, far more than it planned just a few months ago.
The growth is real, though. More than 1.6 million customers have tried the product this year, and annualized trading volume hit $56.8 billion in October, more than five times July.
There’s an asterisk on that number. About $46.7 billion of it comes from market makers. What regular customers actually traded is closer to $10.1 billion annualized, which is still nearly triple July’s level. For more on how the volume race is playing out, see our look at record Kalshi and Polymarket trading.
CEO Jason Robins said that makes DraftKings the third-biggest Predictions exchange by total volume. He also said around 20% of Predictions users have traded non-sports markets, and crypto is creeping toward a double-digit share of consumer volume.
Why the Stock Got Crushed
Mostly the guidance cut. In August, DraftKings was guiding to $700 million to $900 million in adjusted EBITDA for 2026. It’s now $175 million to $275 million, and revenue guidance slipped to $6.35 billion to $6.55 billion.
That’s a lot of profit being redirected into Predictions. The 2027 outlook didn’t help much either. At $7.35 billion to $7.75 billion in revenue and $800 million to $1 billion in adjusted EBITDA, it came in under what analysts were looking for.
DraftKings wasn’t alone this week. Flutter, FanDuel’s parent company, also missed expectations on Wednesday.
What If Courts Kill Sports Contracts?
DraftKings ran the numbers on this one, which you don’t see a lot. Its worst-case model assumes sports event contracts go away on July 31, 2028.
If that happens, each Predictions customer is worth a lot less, and the time it takes to earn back the cost of acquiring them stretches from roughly 18 months to 41. The plan would be to move those users into non-sports markets and DraftKings’ other products. The legal fight behind that scenario is covered in our guide to prediction market regulation.
Robins doesn’t seem worried. He called it a win-win however the courts rule, and said this year’s Predictions customers are paying back faster than the two-year target.
He also pointed to this week’s elections. A few states might now have a clearer path to legal sports betting, and DraftKings could shift spending toward them.
What Happens Next
DraftKings is betting big on prediction markets and paying for it out of this year’s profits. It’s a simple story.
The core business still looks fine. There are more users and better sportsbook margins, and Robins said prediction market rivals haven’t dented the sportsbook. Operators are leaning into the category across the board, as we noted when Sportradar said prediction markets are driving its growth.
Investors just want proof that the Predictions money comes back. 2027 is when they’ll find out, since that’s when DraftKings says spending drops and profits rise.
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