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DraftKings shares fell 28% after a Q3 revenue and loss miss and a deep cut to 2026 profit guidance tied to $650 million to $700 million of Predictions spending.
- DKNG fell about 28% on Friday after Q3 revenue of $1.33 billion missed the roughly $1.40 billion consensus.
- 2026 adjusted EBITDA guidance fell to $175 million-$275 million from $700 million-$900 million.
- 2027 EBITDA guidance of $800 million-$1.0 billion sits below the $1.12 billion consensus.
Lead
DraftKings (NASDAQ: DKNG) shares dropped about 28% on Friday, Nov. 6, after the sports-betting operator reported third-quarter results on Nov. 5 that missed on revenue and profit and reset its full-year outlook sharply lower. Revenue rose 16% to $1.329 billion, short of the roughly $1.40 billion consensus. The adjusted loss was 53 cents per share against an expected loss of about 39 cents. The company attributed the weaker profit outlook to heavy investment in its new Predictions product.What Did DraftKings Report for Q3 2026?
DraftKings reported revenue of $1.329 billion, up from $1.144 billion a year earlier, alongside a net loss of $468.7 million, compared with a loss of $256.8 million in the same quarter of 2025. Adjusted EBITDA was a loss of $316.9 million, against a loss of $126.5 million a year earlier.
Sportsbook revenue rose 31.5% to $783.6 million on handle of $13.9 billion, up 21.9%, with a hold margin of 5.6%. iGaming revenue grew only 2.1% to $460.9 million, and other revenue fell 12.5% to $84.5 million.
Monthly unique payers rose 13% to 4.1 million, and average revenue per payer increased 3% to $109. More than 1.6 million customers have engaged with Predictions so far this year. Chief Executive Jason Robins called the quarter "a pivotal moment" as Predictions became a meaningful growth driver.
Why Did DraftKings Cut Its 2026 Guidance?
DraftKings cut its 2026 guidance because it is spending far more on Predictions than the market had priced in. The company will invest $650 million to $700 million of adjusted EBITDA in the product this year, which pulls full-year adjusted EBITDA down to $175 million-$275 million from a prior range of $700 million-$900 million.
Revenue guidance fell to $6.35 billion-$6.55 billion from $6.50 billion-$6.90 billion. The new midpoint of $6.45 billion is below the consensus of about $6.67 billion.
Excluding Predictions, the core business is guided to $875 million-$925 million of EBITDA. That separates the underlying sportsbook and iGaming profit engine from the cost of building a new category. Investors reacted mainly to the size and timing of the spending, not to a deterioration in the legacy business.
What Does the 2027 Outlook Say About Profitability?
The 2027 outlook points to a recovery that is slower than expected. DraftKings guided 2027 revenue of $7.35 billion-$7.75 billion and adjusted EBITDA of $800 million-$1.0 billion, below the $1.12 billion consensus.
The company expects Predictions revenue of $650 million-$750 million next year, with an EBITDA investment of $250 million-$350 million, down sharply from 2026. Core business EBITDA is guided to $1.15 billion-$1.25 billion.
The guidance implies the heaviest Predictions losses fall this year, with the drag narrowing in 2027. The market took the first-year cost as the more immediate fact and discounted the payoff.
Market Reaction
The selloff followed an after-hours decline of about 25% on Thursday and extended through the Friday session. The move erased a large share of the stock's market value in a single day and put DKNG among the worst performers in the broader market.
The reaction reflects a double miss: the quarterly results fell short, and the outlook for both 2026 and 2027 came in under expectations. Sportsbook strength was overshadowed by slow iGaming growth and the cost of the Predictions rollout.
Strategic Context
Predictions extends DraftKings beyond traditional sports wagering into event-based contracts, a segment where it is spending aggressively to acquire customers early. The strategy trades near-term earnings for position in a category that management says is already contributing to growth.
Capital allocation continues alongside the spending. DraftKings repurchased $154.2 million of stock over the first nine months of the year and retired $300.4 million of convertible notes over the same period.
Outlook
DraftKings enters the final quarter with 2026 profit guidance cut by roughly two-thirds at the midpoint and a 2027 EBITDA target below consensus. The next test is whether Predictions revenue approaches the $650 million-$750 million 2027 target while the investment drag narrows to the guided $250 million-$350 million. Fourth-quarter results will show how quickly the new product scales against that spending.
Mentioned tickers: DKNG
