DraftKings Q1 2025: Can the Sports Betting Giant Deliver on Its Profitability Promise?

Investors are set to scrutinize DraftKings’ (NASDAQ: DKNG) first-quarter 2025 results, due May 8, 2025, as the company seeks to prove it can sustain momentum toward long-awaited profitability. With a conference call scheduled for May 9, management will face questions about its progress on adjusted EBITDA targets, customer growth, and execution risks. Here’s what to watch.

A Turning Point for DraftKings?

DraftKings has long been a bellwether for the U.S. sports betting boom, but its journey to profitability has been rocky. After years of losses, the company reported its first positive free cash flow in Q4 2024 and raised full-year 2025 revenue guidance to $6.3–6.6 billion—a 32%–38% increase over 2024’s $4.8 billion. Yet Q1 2025’s results will test whether these gains are durable.

Key Financial Metrics to Watch

1. Revenue Growth

Analysts project Q1 2025 revenue of $1.48 billion—up 26% from the same quarter in 2024. This reflects DraftKings’ expansion into 28 U.S. states and Ontario, Canada, as well as its iGaming push. However, risks like March Madness’s lackluster betting outcomes (due to fewer upsets) and tax hikes in states like Illinois could pressure margins.

2. Adjusted EBITDA Progress

The company reaffirmed its 2025 adjusted EBITDA guidance of $900–1.0 billion, up sharply from 2024’s $181 million. While Q1’s contribution to this target is unclear, DraftKings’ Q4 2024 adjusted EBITDA of $89 million—a decline from $151 million in Q4 2023—highlights the volatility tied to sports outcomes and promotional spending.

3. Customer and Engagement Metrics

• Total Customers: Grew 42% year-over-year to 10.1 million in Q4 2024, with 3.5 million added at record-low acquisition costs.
• Monthly Unique Payers (MUPs): Rose 36% to 4.8 million, though average revenue per MUP dipped 16% due to customer-friendly sports results.

Strategic Wins and Challenges

Live Betting Dominance

DraftKings’ live betting technology shone during the 2025 Super Bowl, where its app ranked #1 in the sports category and set a handle record of $436 million. This underscores its edge in high-stakes events, a key driver of revenue.

Expansion into New Markets

The company plans to enter Missouri and Puerto Rico in 2025 and aims to leverage its Jackpocket digital lottery platform. However, regulatory hurdles and competition from entrenched rivals like FanDuel and Caesars continue to loom.

Margin Pressures

While DraftKings’ adjusted gross margin is expected to hold at 46%–47%, cash reserves fell to $788 million in Q4 2024 from $1.27 billion in 2023. A new $500 million credit facility aims to address liquidity concerns, but investors will monitor how efficiently capital is deployed.

Analyst Sentiment: Bullish, But Cautious

All 7 analysts covering DKNG rate it a “Buy,” with a median price target of $57. Optimism stems from:
- Strong Customer Growth: MUPs are on track to hit 6.5 million by year-end.
- Operational Leverage: Lower customer acquisition costs and higher hold rates (the percentage of wagers retained by the platform) could boost profitability.

However, risks like sports outcome volatility (e.g., March Madness’s impact on Q1 margins) and regulatory headwinds (e.g., Illinois’ 15% tax on sports betting revenue) temper enthusiasm.

Conclusion: DraftKings’ Profitability Pivot

DraftKings’ Q1 results will be a critical test of its ability to balance growth with profitability. With $900–1.0 billion in adjusted EBITDA for 2025 within reach—if sports outcomes cooperate—the company could finally deliver a full-year profit.

Investors should focus on:
- Revenue trends: Whether Q1’s $1.48 billion estimate is met, despite March’s headwinds.
- Margin improvements: How DraftKings is managing promotional spend and hold rates.
- Cash flow: Whether the $500 million credit facility provides enough runway to avoid dilution.

If DraftKings executes, its stock—down 38% since its last earnings report—could rebound sharply. But with a $4.8 billion market cap and a long road to GAAP profitability, patience will remain key.

In the end, DraftKings’ Q1 results are not just about numbers—they’re about proving that the sports betting giant can finally turn the page from growth at all costs to disciplined, sustainable success.