TLDR
- DraftKings reported Q4 revenue of $1.99 billion, a 43% increase from last year, but adjusted EPS of $0.36 missed the $0.39 consensus estimate
- Shares dropped 15.2% in after-hours trading following 2026 revenue guidance of $6.5-$6.9 billion, significantly below the $7.3 billion analysts expected
- The company forecasted 2026 adjusted EBITDA of $700-$900 million versus the $981 million consensus, citing heavy investment in prediction markets
- DraftKings Predictions launched in Q4 and could represent a $10 billion annual gross revenue opportunity according to analyst estimates
- Revenue will come from trading fees and market-making, with CEO Jason Robins saying the platform isn’t cannibalizing the core sportsbook business
DraftKings delivered fourth-quarter results Wednesday that failed to meet Wall Street expectations. The sports-betting operator posted strong revenue growth but missed on earnings and provided disappointing guidance for the year ahead.
Fourth-quarter revenue came in at $1.99 billion, up 43% from the same period last year. The figure aligned with analyst projections for the quarter.
Adjusted earnings per share totaled $0.36, falling short of the $0.39 consensus. But the real concern emerged when management outlined its 2026 outlook.
The company guided full-year revenue to $6.5 billion to $6.9 billion. Analysts polled by FactSet had forecasted $7.3 billion. Shares fell 15.2% in extended trading following the announcement.
Investment Focus Shifts to Predictions Platform
DraftKings also projected adjusted EBITDA of $700 million to $900 million for 2026. The Street was expecting $981 million.
Management explained the lower guidance reflects planned investment in its newly launched prediction market platform. DraftKings Predictions went live during the fourth quarter.
CEO Jason Robins highlighted the new business extensively in his letter to shareholders. “Predictions is rapidly developing into a massive, incremental opportunity, and we are moving with urgency,” Robins wrote.
He referenced analyst estimates suggesting the prediction market space could deliver $10 billion in annual gross revenue. The company intends to deploy growth capital to build the best customer experience and acquire millions of users.
DraftKings plans to generate revenue through two mechanisms. The primary source will be trading fees charged when users place bets on the platform.
The company will also act as a market-maker, taking the opposite side of certain trades. When users betting against DraftKings lose their positions, the firm earns a profit.
Defensive and Offensive Strategy
The prediction market launch addresses both threats and opportunities. Prediction platforms have pressured stocks across the sports-betting sector by offering wagering options in states without legalized sportsbooks.
Building its own platform lets DraftKings compete in those markets. The company can establish relationships with customers and potentially convert them to sports betting if state laws change.
Robins reassured shareholders the new platform isn’t eating into existing revenue. “We are not seeing a discernible impact from Predictions on our revenue,” he said.
Sports markets drive most prediction platform activity. Kalshi reported that 89% of its 2025 fee revenue came from sports-related trading.
However, some analysts believe fears about prediction markets disrupting sportsbooks are overblown. Jordan Bender at Citizens estimated these platforms currently capture about 5% of total legal sports betting handle.
“One bad Monday Night Football game could have the same negative result on EBITDA as the total impact the prediction market space is currently having on the sector,” Bender noted.
Multiple companies are entering the prediction market arena. Robinhood CEO Vlad Tenev said this week the sector is entering a “super cycle.” Coinbase described prediction markets as a diversification strategy away from crypto.
DraftKings’ 2026 guidance reflects planned launches in new jurisdictions and disciplined planning. The forecast excludes potential impacts from sporting outcomes and doesn’t factor in the modest benefit from year-to-date results.
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