DraftKings Q3 2026: A $605 Million Bet on Predictions Backfires

DraftKings reported Q3 2026 adjusted EPS of -$0.53, missing the consensus estimate of -$0.19. Revenue came in at $1.33 billion, growing 16.2% year over year but falling short of the $1.40 billion Wall Street had expected. The double miss sent an already battered stock deeper into multi-year low territory.

The source of the pain was a single line item: sales and marketing expense surged to $605.7 million from $360.4 million a year earlier, almost entirely tied to the launch of DraftKings Predictions, a federally regulated event-contract trading product operating under CFTC oversight. That spending widened the adjusted EBITDA loss to $316.9 million from $126.5 million in the same quarter last year. Net loss for the quarter reached $468.7 million.

More than 1.6 million customers engaged with Predictions year-to-date, and CEO Jason Robins called the quarter a pivotal moment, saying the offering is now powering meaningful growth. But Predictions revenue was essentially immaterial in 2026 because new-customer promotions offset the vast majority of gross revenue, meaning investors are absorbing the full cost of building the user base before seeing a dollar of meaningful return.

Management responded to the miss by cutting full-year 2026 guidance, pulling revenue expectations down to a range of $6.35 billion to $6.55 billion and adjusted EBITDA to $175 million to $275 million, with Predictions investment for the full year expected to consume $650 million to $700 million of that. The core business is forecast to generate $875 million to $925 million in adjusted EBITDA for the year, suggesting the underlying sportsbook and iGaming operations remain on solid footing.

The entire investment case now rests on 2027. Management introduced targets of $7.35 billion to $7.75 billion in revenue and $800 million to $1.0 billion in adjusted EBITDA for next year, with the Predictions product alone expected to contribute $650 million to $750 million in revenue. Core adjusted EBITDA is projected at $1.15 billion to $1.25 billion. Robins framed 2027 explicitly as the payoff period, asking investors to absorb today's losses in exchange for that outcome.

Shareholders' equity has fallen 75.5% year over year to $179.6 million, while total liabilities have grown 13.9% to $4.43 billion, narrowing the company's financial cushion as the Predictions investment cycle continues into Q4, where another $175 million to $225 million in Predictions adjusted EBITDA investment is planned. Monthly unique payers grew roughly 13% to 4.1 million, and sports consumer volume rose 21.9% to $13.9 billion, so the engagement story is intact even as the profitability timeline stretches further out.