Fantasy sports and betting company DraftKings (NASDAQ: DKNG) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 42.8% year on year to $1.99 billion. On the other hand, the company’s full-year revenue guidance of $6.7 billion at the midpoint came in 8.2% below analysts’ estimates. Its non-GAAP profit of $0.36 per share was 12.5% below analysts’ consensus estimates.

Is now the time to buy DKNG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

DraftKings’ fourth-quarter results met Wall Street’s revenue expectations but fell short on non-GAAP profit, as the market reacted sharply to management’s cautious outlook. CEO Jason Robins described the quarter as a “high note,” citing strong execution in core Sportsbook and the scaling of new offerings like Predictions. However, he also acknowledged that customer acquisition rates had normalized and that performance was shaped by both improved cohort economics and an evolving promotional environment.

Looking forward, DraftKings’ guidance reflects a conservative approach to revenue and profitability, as management plans to prioritize disciplined investment in Predictions and manage spend in new jurisdictions. Robins emphasized that Predictions could become a significant growth engine, though he cautioned that “it’s just too early to quantify” the revenue impact for the coming year. CFO Alan Ellingson added that the outlook includes startup costs for new markets, and highlighted flexibility in marketing spend as the company evaluates long-term customer value.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to improved Sportsbook margins, stable promotional intensity, and the early traction of new offerings like Predictions, while also highlighting regulatory progress and cautious investment in upcoming initiatives.

• Sportsbook margin expansion: DraftKings achieved higher net revenue margin in Sportsbook, driven by increased parlay mix and efficient promo optimization, which management believes should sustain profitability improvements even as handle growth moderates.
• Predictions category gains momentum: The new Predictions platform saw rapid uptake, especially in states where DraftKings had limited Sportsbook presence; Robins described it as the company’s “most exciting new growth opportunity” since 2018, with early data suggesting minimal cannibalization of core revenue.
• Marketing leverage and synergy: Management emphasized the ability to repurpose national marketing spend across both Sportsbook and Predictions, which they view as a competitive advantage for customer acquisition and cost efficiency.
• Regulatory clarity supports expansion: The Commodity Futures Trading Commission (CFTC) has signaled a more defined framework for event contracts, which Robins called “constructive” for scaling Predictions and supporting future product innovation.
• Stable competitive environment: Promotional intensity across online sports betting and iGaming remained rational, with management noting no recent increases in promo spend from smaller operators and maintaining a cautious stance in their guidance.

Drivers of Future Performance

DraftKings’ outlook for the next year is driven by measured investment in new verticals like Predictions, the pace of new market launches, and a disciplined approach to customer acquisition and marketing efficiency.

• Predictions investment as upside lever: Management sees Predictions as a major future growth driver, but is embedding little to no revenue impact in guidance for 2026, focusing instead on customer acquisition, product development, and regulatory progress in the category.
• Core Sportsbook and iGaming monetization: DraftKings expects continued improvements in monetization from existing customers, especially through higher parlay mix, AI-driven promo optimization, and disciplined spend on promotions, though acknowledges slower customer acquisition versus prior years.
• Jurisdictional expansion and regulatory risk: The company’s guidance includes startup costs for anticipated new state launches and ongoing engagement with lawmakers. Management remains cautious about tax increases or shifts in regulatory frameworks that could impact profitability or market penetration.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be watching (1) the pace of adoption and monetization for the Predictions platform as new features and Railbird integration roll out; (2) whether the company maintains stable Sportsbook margins through disciplined promo spend and product mix; and (3) the impact of new state launches and regulatory developments on overall market share. The effectiveness of DraftKings’ national marketing strategy across verticals and progress toward regulatory clarity will also be key signposts.

DraftKings currently trades at $21.80, down from $25.30 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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