DraftKings has sharply reduced its 2026 earnings outlook as it commits more money to prediction markets, reopening a familiar question for the US betting industry: how long must shareholders wait for another round of customer acquisition to pay off?
In results published on 5 November, the company cut its full-year forecast for adjusted earnings before interest, tax, depreciation and amortisation, or EBITDA, to between $175m and $275m, from between $700m and $900m. The revised outlook reflects expected investment in Predictions of between $650m and $700m on that same adjusted EBITDA basis.
Third-quarter revenue rose 16% to $1.33bn. Net loss widened to $468.7m, from $256.8m a year earlier, while sales and marketing spending increased 68% to $605.7m.
The sharpest insight into the strategy sits in the accompanying presentation. DraftKings has modelled what happens to customer payback if sports event contracts cease in July 2028. For customers acquired in 2027, the estimated recovery period stretches from 18 months to 41 months.
That is a company scenario, with an assumed date. It offers a useful way to assess the risk DraftKings is taking today.
A Smaller Earnings Forecast Behind Growing Revenue
At the midpoint, the adjusted EBITDA forecast has fallen from $800m to $225m, a reduction of roughly 72%. The revenue forecast has also been lowered, to between $6.35bn and $6.55bn from between $6.5bn and $6.9bn. The much larger movement in expected earnings shows the importance of spending decisions to this reset.
DraftKings still expects its established core business to generate between $875m and $925m of adjusted EBITDA this year. Management is using that expected earning power to support the Predictions expansion, while also increasing investment in online casino growth.
These measures require care. Adjusted EBITDA excludes items included in statutory profit, and the Predictions investment figure describes an expected drag on adjusted earnings. It is not a purchase price or a separate capital expenditure budget. The quarterly net loss is a different measure again.
Chief financial officer Alan Ellingson argues that the core business generates the cash needed to fund attractive returns in Predictions. Shareholders are therefore being asked to assess the quality of those future returns alongside a substantial reduction in this year's forecast.
DraftKings Has Expanded This Way Before
The company began with daily fantasy sports in 2012, launched its sportsbook in 2018 and added online casino in 2019. Each expansion gave an existing sports audience another product to use, creating opportunities to spread technology, marketing and customer relationships across a larger business.
Its arrival on Nasdaq in April 2020, through the combination with Diamond Eagle and betting technology supplier SBTech, brought the consumer brand and more of its operating technology together. Control over the product became part of the growth argument.
The financial reward took time. For 2025, DraftKings reported positive net income, with $3.7m attributable to common shareholders. That was a narrow statutory profit after years of expansion, but an important milestone in a business built around the promise that scale would eventually improve returns.
Predictions extends that history. DraftKings can use a recognised brand, an existing audience and trading infrastructure to enter an adjacent category. It is also asking investors to finance another expensive period of acquisition soon after reaching that profitability milestone.
Owning an Exchange Changes the Commercial Opportunity
DraftKings acquired Railbird and its federally designated exchange in October 2025. It launched the Predictions app that December, then announced its proprietary DKeX exchange in June 2026, integrated into its broader sports and casino app.
Customers trade contracts tied to real-world outcomes, including sporting results. DraftKings' prediction operations combine an exchange, brokerage and market-making activities, giving the group several ways to earn from that trading.
The company reported an effective take rate across all participants of approximately 11.1% of consumer volume on DKeX in September and October. DraftKings captured roughly two-thirds of that gross revenue, equivalent to about 7.3% of consumer volume.
Those figures combine fees and market-making returns. They are broader than a simple exchange commission, and precede promotional deductions and operating costs.
The strategic attraction is clear: controlling more of the trading infrastructure allows DraftKings to retain more of the economics and develop products at its own pace. The financial test is whether that retained revenue can cover the cost of attracting and keeping customers.
Trading Activity Still Has to Become Durable Revenue
Management says more than 1.6 million customers have engaged with Predictions this year. It nevertheless expects the product's 2026 revenue contribution to be immaterial because new-customer promotions will absorb most of the gross revenue generated.
That combination explains why activity and financial contribution can look so different. An attractive introductory offer can bring someone onto a platform; the commercial value depends on what happens after that offer has been used.
Volume figures also need their definitions attached. DraftKings reported $56.8bn of annualised total trading volume for October, alongside $10.1bn of annualised consumer volume. The larger measure includes market-maker activity. Both extrapolate a month's trading into a full-year rate; neither is annual revenue.
For a reader assessing the business, the useful progression is from initial engagement to repeat activity, then to revenue after promotions and profit after costs. The headline customer count establishes reach. The remaining steps determine what that reach is worth.
The Downside Model Puts a Value on Time
DraftKings' presentation groups customers by the year they first use Predictions and estimates how long their cumulative adjusted gross profit takes to cover external acquisition marketing.
Its model produces the following payback expectations:
| Customer cohort | With sports contracts continuing | If sports contracts end on 31 July 2028 |
|---|---|---|
| Customers acquired in 2026 | About 20 months | Expected to recover acquisition marketing before the assumed cutoff |
| Customers acquired in 2027 | About 18 months | About 41 months |
These are internal forecasts. The presentation describes the curves as schematic, and recovery of acquisition marketing on an adjusted gross profit basis is one milestone within the wider cost of running the business.
In the downside case, adjusted gross profit per customer falls to 20% of the level expected with sports contracts from August 2028. The scenario also assumes no further legalisation of online sports betting or iGaming.
Management expects other products, including non-sports predictions, Pick6 and lottery, to preserve some customer value. Its shareholder letter says nearly 20% of Predictions customers have already traded non-sports markets. That customer percentage measures adoption; the model's 20% residual gross profit is a separate assumption about the value retained after sports contracts disappear.
The central uncertainty is the time available to earn back the spending. An earlier restriction, weaker retention or more generous promotions would change the calculation. Continued sports access and stronger customer economics could improve it.
There is also an unavoidable limit to the evidence available today. Predictions launched in December 2025. A forecast extending 20 or 41 months necessarily relies on assumptions about behaviour well beyond the product's observed trading history.
Federal Oversight Leaves Questions for the Courts
DraftKings' own quarterly filing shows that the legal risk reaches its business directly. It discloses lawsuits alleging that its sports prediction contracts amount to unlawful betting in certain states. Those are allegations, not findings against the company. DraftKings says it intends to defend the actions and cannot estimate the possible losses.
The federal regulator is pressing its own position. On 5 November, the Commodity Futures Trading Commission issued an interpretation requiring designated contract markets to stop domestic geographic restrictions that violate impartial access requirements within 30 days, or explain why compliance is not feasible.
That statement strengthens the case for national market access from the regulator's perspective. It does not, by itself, settle the litigation disclosed by DraftKings or guarantee the lifespan assumed in its customer model.
For the business, a disagreement about jurisdiction can become a disagreement about returns. The longer a customer can use the intended product, the more opportunity there is to recover the money spent acquiring them. Legal uncertainty therefore belongs inside the economic assessment.
What DraftKings Now Needs to Prove
The 2027 outlook assumes a substantial change. DraftKings expects Predictions revenue of between $650m and $750m, with its adjusted EBITDA investment falling to between $250m and $350m. Group adjusted EBITDA is forecast at between $800m and $1bn.
That requires customers acquired through today's promotions to produce meaningful revenue as the investment burden eases. The established business must also deliver the earnings that support the wider group.
British readers following Flutter's spending and savings decisions will recognise the broader tension. Large operators have valuable audiences and technology, alongside competing demands on the money those assets generate.
Our view is that DraftKings has a credible commercial reason to pursue Predictions. Its distribution and ownership of the trading infrastructure give it advantages worth testing. Publishing a downside model also makes the debate more useful by exposing assumptions that investors can challenge.
The figures to watch now are repeat activity after introductory offers, revenue after promotional deductions and the cost of attracting each new customer. The 41-month downside forecast helps explain why management still believes the investment can pay back. DraftKings has demonstrated reach; its next reporting cycles need to show how much of that reach can become repeat, profitable business.
Editorial research and analysis by Lucky BetMastermind, with help from ChatGPT.