TLDR
- DraftKings posted Q4 revenue of $1.99 billion, up 43% year-over-year, but adjusted EPS of $0.36 fell short of the $0.39 Wall Street estimate
- The stock plunged 15.2% after the company guided 2026 revenue to $6.5-$6.9 billion versus analyst expectations of $7.3 billion
- DraftKings forecasted 2026 adjusted EBITDA of $700-$900 million, missing the $981 million consensus due to prediction market investments
- CEO Jason Robins highlighted DraftKings Predictions as a potential $10 billion annual revenue opportunity worth aggressive investment
- The company will monetize its prediction platform through trading fees and market-making, competing directly with Kalshi and Polymarket
DraftKings shares tumbled in after-hours trading Wednesday following an earnings report that disappointed investors. The sports-betting company delivered mixed fourth-quarter results while issuing 2026 guidance well below Wall Street expectations.
Revenue for the quarter reached $1.99 billion, representing 43% growth compared to the prior year. The top-line figure met analyst projections.
Adjusted earnings per share of $0.36 missed the consensus estimate of $0.39. More concerning for investors was the company’s outlook for the year ahead.
DraftKings forecast 2026 revenue between $6.5 billion and $6.9 billion. Analysts had expected $7.3 billion. That gap sent shares down 15.2% in extended trading.
Betting Big on Prediction Markets
The company’s adjusted EBITDA guidance ranged from $700 million to $900 million for 2026. Wall Street was looking for $981 million.
Management attributed the conservative outlook to planned spending on DraftKings Predictions. The prediction market platform launched during the fourth quarter.
CEO Jason Robins devoted substantial commentary to the new venture in his shareholder letter. “Predictions is rapidly developing into a massive, incremental opportunity, and we are moving with urgency,” he wrote.
Robins cited analyst estimates suggesting the prediction market business could generate $10 billion in annual gross revenue over time. The company plans aggressive customer acquisition to capture market share.
DraftKings will earn revenue through two channels on the platform. Trading fees represent the primary income stream, charged each time users place bets.
The second source comes from market-making activities. DraftKings will take the opposite side of certain trades, booking profits when users lose.
Strategic Rationale Behind the Move
The prediction market push serves multiple strategic purposes. These platforms have weighed on DraftKings and competitor stocks as they enable betting in states without legal sportsbooks.
Launching its own platform allows DraftKings to enter restricted markets. The company can build customer relationships and convert users to sports betting if regulations change.
Robins assured investors the prediction business isn’t hurting core operations. “We are not seeing a discernible impact from Predictions on our revenue,” he stated.
Sports events dominate trading volume on prediction platforms. Kalshi generated 89% of its 2025 fee revenue from sports-related markets.
Some analysts have downplayed concerns about prediction markets threatening traditional sportsbooks. Jordan Bender from Citizens estimated these platforms capture roughly 5% of total legal sports betting volume.
“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 wrote in January.
Other platforms are expanding into prediction markets as well. Robinhood CEO Vlad Tenev called prediction markets a “super cycle” this week. Coinbase announced plans to use prediction markets for crypto diversification.
The company’s 2026 forecast accounts for planned jurisdictional launches and excludes the impact of sporting outcomes. It also doesn’t include the modest benefit from year-to-date sport results.
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