DraftKings Lifts Predictions Spend to $700m, Cuts 2026 Profit Midpoint by $575m

DraftKings now plans to put $650 million to $700 million into Predictions this year, which takes its 2026 adjusted EBITDA guidance down to $175 million to $275 million. Its sportsbook had a strong quarter: the cut is a spending choice, and the payback case leans on how long sports contracts survive.

• DraftKings lowered its 2026 adjusted EBITDA guidance on 5 November to $175 million to $275 million, from $700 million to $900 million, as Predictions investment rose to $650 million to $700 million
• Third-quarter revenue rose 16% to $1.33 billion, but the net loss widened to $468.7 million from $256.8 million
• Sportsbook handle grew 12% and sportsbook net revenue 36%, which DraftKings says shows prediction markets have had "no discernible impact" on that business
• For 2027 it guides to revenue of $7.35 billion to $7.75 billion and adjusted EBITDA of $800 million to $1.0 billion, after a further $250 million to $350 million on Predictions
• Its downside case assumes sports contracts last until July 2028, while New Jersey's Supreme Court petition is pending

A $575 Million Cut, Most of It Chosen

DraftKings reported third-quarter revenue of $1,329 million on 5 November, up 16% from $1,144 million. The net loss was $468.7 million, against $256.8 million a year earlier, and adjusted EBITDA was a loss of $316.9 million, against a $126.5 million loss. Sales and marketing rose 68.1% to $605.7 million, mainly on prediction market marketing and its Super App launch, according to the quarterly report.

Revenue guidance for 2026 is now $6.35 billion to $6.55 billion, from the $6.5 billion to $6.9 billion it held in May and August. Adjusted EBITDA guidance falls to $175 million to $275 million from $700 million to $900 million, a $575 million reduction at the midpoint. The core business is now expected to make $875 million to $925 million; in August, Chief Financial Officer Alan Ellingson said it was on track for about $1 billion. DraftKings blames the gap on extra iGaming investment and "modestly customer-friendly sport outcomes".

Predictions revenue will be immaterial in 2026, the company says, because new customer promotions offset most of the gross revenue.

For 2027, DraftKings expects core adjusted EBITDA of $1.15 billion to $1.25 billion and Predictions revenue of $650 million to $750 million. It says it will adjust Predictions investment to regulatory developments and expects the business to add to adjusted EBITDA in 2028.

What DraftKings Disclosed About Predictions

More than 1.6 million customers have engaged with Predictions this year, according to the shareholder letter. Annualised consumer volume reached $10.1 billion in October, nearly three times July's level. Across exchange fees, broker fees and market making, DKeX took 11.1% of consumer volume in September and October, of which DraftKings kept 65.6%.

The company estimates its 2026 cohort will pay back in about 20 months. In a downside case where sports contracts end on 31 July 2028, it says the 2027 cohort would be more than half paid back by then and fully within four years, assuming gross profit per customer falls to 20% of the level with sports. On the 6 November call, Chief Executive Jason Robins called a mid-2028 Supreme Court ruling the base case, InGame reported.

Strong Sportsbook, Weaker iGaming

Sportsbook net revenue grew 36% on 12% handle growth, with margin up about 120 basis points to 6.4% and hold above 11%. iGaming revenue grew 2.1% to $460.9 million while gross revenue grew 7%, the difference absorbed by promotions behind a 76% rise in customer acquisition. Gaming taxes rose $64.4 million to $519.9 million; the documents do not quantify Illinois' per-bet charge or other state changes.

InGame reported that the shares fell as much as 29% to $16.60 on 6 November, their lowest since early 2023.

A Letter to Congress on VIP Programmes

DraftKings also replied on 6 November to the inquiry from Senator Richard Blumenthal and Representatives Paul Tonko and Valerie Foushee. In the six-page letter, obtained by InGame, it says it "does not target anyone based on indicators of potential problem gambling". It says fewer than 1% of customers are in its Diamond and Onyx loyalty tiers, and declined to give average losses for rewards members, calling them "competitively sensitive".

The Cut Is a Spending Decision, Not a Trading Miss

On Ellingson's August figure, roughly $100 million of the reduction comes from the core business; the rest is Predictions spend DraftKings chose to add. That separates it from Flutter, whose 4 November cut was driven by sports results. The sportsbook is funding the exchange.

The Payback Case Rests on DraftKings' Own Model

The 20-month payback and the 20% residual-profit assumption come from DraftKings' internal model, and the 11.1% take rate covers only September and October, the start of the NFL season. "Engaged" is not the same as active. A ruling before mid-2028, or tighter state pressure of the kind that pushed DraftKings out of Utah, would shorten the window the model needs.

FanDuel Is Spending Far Less

Flutter puts its 2026 prediction market loss at about $200 million, with 66,000 average monthly players and $119 million of volume in the third quarter. DraftKings is spending more than three times as much, with a sportsbook margin of 6.4% against the 6.8% Flutter reports for FanDuel's US business.

DraftKings has bet its 2026 profit on Predictions being a business rather than a hedge. Its own downside case shows that bet is a wager on the courts' timetable.