DraftKings Slashes 2026 Profit Outlook as Prediction Market Spending Surges

DraftKings has slashed its 2026 earnings outlook despite reporting higher third-quarter revenue, with the company committing hundreds of millions of dollars to expanding its prediction-market business.

The sportsbook operator, and one of the best sports betting sites, reported $1.329 billion in revenue for the quarter ending Sept. 30, up 16% from $1.144 billion a year earlier. However, the company recorded a net loss of $468.7 million.

More significantly, DraftKings reduced its full-year adjusted EBITDA guidance from $700 million–$900 million to $175 million–$275 million.

The company attributed much of the reduction to increased spending on DraftKings Predictions, which it now expects will require between $650 million and $700 million in adjusted EBITDA investment this year.

Predictions spending drives guidance cut

DraftKings said more than 1.6 million customers had engaged with its prediction-market offering through the first nine months of 2026. The company plans to invest another $175 million–$225 million in Predictions during the fourth quarter, primarily to attract customers and expand the business.

That spending comes with limited immediate revenue.DraftKings expects Predictions revenue to be immaterial in 2026, with promotional incentives offsetting most of the gross revenue generated. 

"Our core business continues to generate significant free cash flow, which we are deploying to fund growth in our Predictions business at attractive payback periods," CFO Alan Ellingson said in the Nov. 5 earnings release.

DraftKings also lowered its full-year revenue forecast to $6.35 billion–$6.55 billion, down from its previous range of $6.5 billion–$6.9 billion.

Core sportsbook business continues growing

Despite the earnings downgrade, DraftKings reported stronger customer engagement during the quarter. Monthly unique payers increased 13% to 4.1 million, while average revenue per payer climbed 3% to $109. The company attributed its revenue growth primarily to customer engagement and improved sportsbook net revenue margin.

Excluding Predictions, DraftKings expects its core business to generate $875 million–$925 million in adjusted EBITDA this year. The difference suggests its established sportsbook and iGaming operations remain profitable on that measure, although the company is choosing to reinvest heavily in prediction markets.

Flutter and BetMGM provide contrasting results

DraftKings' earnings follow a difficult quarter for rival Flutter Entertainment, the parent company of FanDuel. Flutter reported $3.87 billion in third-quarter revenue, up 2%, but adjusted EBITDA declined 25% to $360 million.

Its U.S. business generated $1.455 billion in revenue, while adjusted EBITDA fell 94% to just $3 million. Flutter cited prediction-market investment and its Alberta launch among the factors affecting profitability.

BetMGM, meanwhile, reported $710 million in third-quarter net revenue and $86 million in adjusted EBITDA, up 7% and 112%, respectively.

The results illustrate different spending priorities across major gambling operators as prediction market apps become an increasingly important competitive battleground.

DraftKings targets growth in 2027

DraftKings expects its Predictions investment to begin generating more substantial revenue next year. The company introduced 2027 revenue guidance of $7.35 billion–$7.75 billion, including $650 million–$750 million from Predictions.

It also forecasts adjusted EBITDA of $800 million–$1 billion, after accounting for another $250 million–$350 million in Predictions investment.

For DraftKings, the question is no longer whether prediction markets are attracting customers. The challenge is turning that growth into sustainable earnings while maintaining profitability in its established sportsbook and casino businesses.