Analysis
DraftKings Sank 23% as Predictions Spending Ate Its Profit
DraftKings fell about 23% after hours on Thursday after cutting its 2026 adjusted EBITDA forecast to $175 million to $275 million, from $700 million to $900 million.
DraftKings told investors on Thursday, November 5, that its bet on prediction markets will cost much more than planned this year. The sports-betting company cut its 2026 adjusted EBITDA forecast to $175 million to $275 million, from $700 million to $900 million, and raised the amount it expects to spend building its Predictions product to $650 million to $700 million, from the $200 million to $300 million included in the earlier range. The shares fell about 23% to $18.08 in extended trading, according to Yahoo Finance, from a close of $23.11 on Wednesday.
The quarter itself fell short. Revenue rose 16% to $1.33 billion, below the roughly $1.39 billion analysts expected, and the adjusted loss of 53 cents a share was wider than the 25 to 36 cents analysts expected, depending on the survey. Adjusted EBITDA was a loss of $316.9 million, against a loss of $126.5 million a year earlier. The company also lowered its 2026 revenue forecast to $6.35 billion to $6.55 billion, a midpoint of $6.45 billion against $6.7 billion before.
Chief executive Jason Robins framed the spending as an investment that is already working: "the Predictions offering we have been building is now powering meaningful growth for our business." Monthly unique payers rose to 4.1 million, 500,000 more than a year earlier, and DraftKings guided 2027 revenue to $7.35 billion to $7.75 billion with adjusted EBITDA of $800 million to $1 billion, including up to $750 million of Predictions revenue. The pitch is that a smaller profit now buys a position in a market that is growing quickly.
The competition explains the urgency. Prediction markets let customers trade contracts on the outcome of games and events, and they are regulated as federal derivatives rather than as state gambling, which means they can reach states where sports betting is not legal. Needham estimated that Kalshi held 76% of sports prediction-market volume in the NFL's opening week, against 3% for DraftKings' exchange, and Robinhood's event-contract revenue rose more than sixfold to $173 million in the third quarter. Courts are still split on the legal question: the Ninth Circuit ruled in the third quarter that Kalshi's sports contracts are likely not federally regulated swaps, the opposite of a Third Circuit decision.
For shareholders the arithmetic is uncomfortable. A company that had to earn about $418 million of adjusted EBITDA in the second half to reach its old range is now planning for a fraction of that, while competing against a rival with more than twenty times its share of the new market. The reaction also shows how much weight guidance carries: revenue grew 16% in the quarter, yet the cut to one profit line took almost a quarter off the share price within minutes.