Earnings Call Insights: DraftKings Inc. (DKNG) Q3 2025
Management View
- Jason Robins, CEO, opened by stating, “This is the most bullish I’ve ever felt about the future of DraftKings,” while announcing a revision to fiscal year 2025 guidance ranges. He highlighted that “underlying growth in the business is accelerating” and pointed to new exclusive marketing agreements with ESPN and NBCUniversal, as well as the launch of DraftKings predictions in the coming months.
- Robins emphasized, “In 2025, only 3 years later, we expect to generate $5.9 billion to $6.1 billion of revenue and $450 million to $550 million of positive adjusted EBITDA.” He noted improvements in Sportsbook net revenue margin and very high customer retention rates, citing that “retention of NFL week 1 customers is up over 300 basis points in the last 4 NFL weeks compared to the same weeks a year ago.”
- He shared that “NFL handle has grown 13% season to date, and NBA handle has grown 19% season to date,” and that iGaming net revenue growth accelerated to “25% year-over-year, the fastest growth we’ve experienced since the first quarter of 2024.”
- Robins announced the expansion of the share repurchase program, stating, “We have bought back 9.3 million shares since the inception of this program, and we are pleased to announce that our Board has authorized increasing our repurchase program from $1 billion to $2 billion.”
- CFO Alan Ellingson stated, “In the third quarter, we generated $1.144 billion of revenue, representing 4% year-over-year growth. We also generated negative $127 million of adjusted EBITDA. First off, we do recognize our third quarter financial results were below our expectations due to the pronounced impact of customer-friendly sports outcomes.”
Outlook
- The company revised its fiscal year 2025 guidance from the previous range of $6.2 billion to $6.4 billion in revenue and $800 million to $900 million in adjusted EBITDA to $5.9 billion to $6.1 billion in revenue and $450 million to $550 million in adjusted EBITDA.
- The updated guidance “now include[s] the expected launch of a predictions market offering,” according to CFO Ellingson.
- Robins indicated the company will “focus on the states where we do not offer Sportsbook” for the DraftKings predictions launch, describing it as a “significant incremental opportunity.”
Financial Results
- Revenue for Q3 2025 was reported at $1.144 billion, which marked 4% year-over-year growth.
- Adjusted EBITDA for the quarter was negative $127 million, with Ellingson attributing this to “customer-friendly sports outcomes” that impacted revenue by more than $300 million in the last two months.
- Sportsbook handle increased 10% year-over-year to $11.4 billion, and iGaming net revenue growth accelerated to 25% year-over-year.
- The share repurchase program was increased to $2 billion, with 9.3 million shares already repurchased.
Q&A
- David Katz, Jefferies: Asked about OSB hold percentage and confidence in normalization. Robins responded, “Last quarter, meaning Q2, we actually had positive outcomes… I think it can swing either way, certainly.”
- Katz followed up on the addition of Greg Wendt to the Board. Robins stated, “He has tremendous connections on the public affairs side… and really I think is going to contribute to the strategy and direction of the company.”
- Stephen Grambling, Morgan Stanley: Inquired about parlay volatility and prediction market profitability. Robins explained, “Maximizing long-term expected value is the right strategy as long as you’re managing risk in a way that’s appropriate,” and emphasized a “very data-driven, very analytical” approach to prediction market investments, with conservative payback assumptions.
- Daniel Politzer, JPMorgan: Asked about regulatory conversations and prediction market evolution. Robins highlighted extensive engagement with regulators and indicated the focus will be on sports, noting “the volume and opportunity is going to be in the sports space.”
- William Lampen, BTIG: Questioned DraftKings’ competitive edge in predictions. Robins cited “extraordinary amount of data and expertise” and scale as key advantages.
- Robert Fishman, MoffettNathanson: Sought insight on the ESPN deal’s significance. Robins described ESPN as “the premier sports brand” and stressed the integration’s potential to “take this to a whole new level.”
- Robin Farley, UBS: Queried about parlays in prediction markets. Robins responded that “parlays are just challenging with predictions because it’s liquidity based” and will be “very limited compared to what you would find in our traditional sports betting product.”
- Brandt Montour, Barclays: Probed on the gap between luck impact and EBITDA guidance. Robins attributed most of the gap to outcomes, with some allocated to “prediction spend” and product development for the new offering.
- Jed Kelly, Oppenheimer: Asked about 2026 investments. Robins anticipates “a little bit of reduction in things like promotion and marketing” for core business; investment will continue in new states and AI.
- Shaun Kelley, BofA: Sought views on pricing pressures from predictions. Robins stated, “It’s a much better value prop in terms of the overall pricing and promotions that you get using an online sportsbook.”
- Additional questions covered customer acquisition strategy, Spanish language app rollout, and parlay mix drivers, with Robins reiterating the company’s data-driven and cautious investment approach.
Sentiment Analysis
- Analysts repeatedly pressed on prediction market risks, profitability, and the impact of sports outcomes, suggesting a neutral to slightly negative tone as they sought clarity on new investments, competitive positioning, and guidance reduction.
- Management maintained a confident tone in prepared remarks, with Robins describing the outlook as the “most bullish” ever and repeatedly emphasizing competitive advantages and long-term growth potential. During Q&A, responses were measured and data-focused, with phrases like “we’re going to be very data-driven, very analytical” and “as long as you can manage that risk, maximizing long-term value is the way to go.”
- Compared to the previous quarter, analyst tone shifted from growth optimism to more probing about risks, while management’s tone, though still confident, was more cautious particularly regarding prediction market investments and guidance reductions.
Quarter-over-Quarter Comparison
- The most notable change was a downward revision of full-year revenue and adjusted EBITDA guidance due to a $300 million negative impact from customer-friendly sports outcomes, compared to Q2’s positive outcomes and record results.
- In Q2, management maintained guidance and expressed optimism about high-end achievement, while in Q3, guidance was reduced and included expected prediction market investments.
- Analyst focus shifted from growth levers and product innovation in Q2 to risk management, the impact of luck, and prediction market uncertainties in Q3.
- Management sentiment remained positive but more guarded, focusing on risk, conservative investment, and discipline in new markets. The tone moved from Q2’s expansion confidence to Q3’s cautious optimism amid new headwinds.
Risks and Concerns
- Management noted significant swings in quarterly results due to sports outcomes, stating, “there will be periods where we can meaningly overperform or underperform our expectations based on these variances.”
- The company acknowledged the unpredictability of the new prediction market product, with Robins stating, “it is still so early and a lot of unknowns, and we have 0 data.”
- Analysts highlighted concerns around volatility in hold rates, competitive threats from new market entrants, and the profitability of prediction markets.
Final Takeaway
DraftKings’ Q3 2025 call highlighted a strategic pivot toward new products and expanded media partnerships but was defined by a notable downward revision in guidance due to a $300 million impact from sports outcomes. Management emphasized strong underlying customer metrics, accelerating engagement, and a disciplined approach to launching prediction markets, while also expanding its share repurchase authorization to $2 billion. The company remains bullish on its long-term potential but is navigating increased volatility and investor scrutiny as it invests in new growth avenues and manages near-term financial headwinds.