DraftKings' Prediction Push: Is Growth Outpacing Sportsbook Yet?

Date of Call: Feb 13, 2026

Financials Results

• Revenue: Q4: Nearly $2 billion, up 43% YOY; FY 2025: Over $6 billion, up 27% YOY
• Operating Margin: Q4 Adjusted EBITDA margin: 17%, up more than 1,000 basis points YOY

Guidance:

• FY 2026 revenue expected between $6.5 billion and $6.9 billion.
• FY 2026 adjusted EBITDA expected between $700 million and $900 million.
• Guidance reflects investments in Predictions, jurisdiction launches, and evolving business conditions.

Business Commentary:

Revenue and EBITDA Growth:

• DraftKings reported revenue of nearly $2 billion for Q4 2025, showing a 43% year-over-year increase, and adjusted EBITDA of $343 million, which is 4x the prior year period.
• The significant growth was driven by sustainable advantages in product, technology, trust, and marketing, amplified by AI and machine learning, leading to higher customer lifetime value and efficient customer acquisition.

Predictions Market Opportunity:

• DraftKings anticipates a massive incremental opportunity in the predictions market, targeting hundreds of millions in annual revenue in the years ahead, with a potential $10 billion annual gross revenue opportunity.
• This expectation is based on early strong signals, such as the second most downloads in its category on Super Bowl Sunday and a 3x increase in daily trading volume, supported by a stable regulatory environment from the CFTC.

Sportsbook Performance:

• Sportsbook revenue increased 64% year-over-year to $1.4 billion in Q4 2025, with handle growth accelerating to 13% year-over-year.
• The performance was attributed to a strong parlay handle mix increase and successful adoption in new states like Missouri, despite Sportsbook-friendly outcomes.

Investment in Predictions:

• DraftKings plans to deploy growth capital to build the best customer experience in predictions and acquire millions of customers, expecting significant step function improvements in 2026.
• The investment strategy leverages existing infrastructure and marketing capabilities, with plans to integrate Railbird and launch a market-making division to enhance liquidity and customer experience.

Fiscal Year 2026 Guidance:

• For fiscal year 2026, DraftKings expects revenue between $6.5 billion and $6.9 billion and adjusted EBITDA between $700 million and $900 million.
• The guidance reflects planned investments in predictions, jurisdiction launches, and evolving business conditions, maintaining a conservative approach to ensure achievable targets.

Sentiment Analysis:

Overall Tone: Positive

• Statements include: 'closed 2025 on a high note, setting new quarterly records,' 'business is scaling in a durable way,' 'we expect our revenue and adjusted EBITDA to grow for many years to come,' and 'we are really excited and positioned really well for success in the future.'

Q&A:

• Question from Daniel Politzer (JPMorgan Chase & Co): Why are you more aggressively leaning into prediction markets now? What gives you confidence? How are you thinking about investment required for 2026?
  Response: CFTC's regulatory engagement provides a stable environment; early numbers show strong growth potential. Investment will be incremental, leveraging existing marketing and technology, with a focus on customer acquisition.

• Question from Daniel Politzer (JPMorgan Chase & Co): In terms of guidance, there's an implied deceleration in revenues. Can you give the building blocks for sports betting and handle growth in 2026?
  Response: Guidance is conservative to avoid missing numbers again; core business has upside, and Predictions revenue is not included in the guide. Handle growth may slow as net revenue margin improves and promo is optimized.

• Question from David Katz (Jefferies LLC): Can you walk through 2026 and what could drive revenue higher, particularly around Predictions, and factors for EBITDA range?
  Response: Predictions is all upside with no revenue in the guide; core business also has upside. Higher EBITDA could come from better-than-expected handle and margin improvements, while lower EBITDA might result from higher investments or slower handle growth.

• Question from Stephen Grambling (Morgan Stanley): What are you seeing in terms of NGR spend in older vs. newer states? How to think about increasing penetration vs. spend per head?
  Response: Growth is seen across states. Both customer penetration and monetization per head offer upside, especially through increasing parlay mix and optimizing promo with AI.

• Question from Eric Sheridan (Goldman Sachs Group): How should we think about Predictions as a lever for user growth and activity growth?
  Response: Predictions is not cannibalistic; it attracts incremental customers, especially in new states where DraftKings was previously not present in OSB.

• Question from Benjamin Chaiken (Mizuho Securities USA LLC): How do you plan to build liquidity in the Railbird exchange? Is DraftKings OSB platform a competitive differentiator?
  Response: Liquidity will be built via market-makers and DraftKings' proprietary market-making. The OSB platform is a differentiator due to existing pricing models, data science, and marketing infrastructure.

• Question from Brandt Montour (Barclays Bank PLC): What was achieved post launch in late December? How will you handle advertising for Predictions given legal OSB states?
  Response: Initial launch was bare-bones; product is now competitive. National marketing is a synergy advantage, allowing rotation of messages to drive both OSB and Predictions.

• Question from Raymond Bowers (Wells Fargo Securities): Can you break down revenue guide granularity around handle, hold, and promo?
  Response: Guidance considers interactions between handle, hold, and promo; improvements in hold and promo cuts can impact handle, but overall net is positive for revenue growth.

• Question from Raymond Bowers (Wells Fargo Securities): Monthly unique player number was flat YOY. How should that trend, and is it the right KPI?
  Response: MUP decline is due to lower customer acquisition in 2025 vs. 2024; excluding Jackpocket, MUP growth was about 5%. Retention remains high, and new cohorts show over 100% revenue retention.

• Question from Robert Fishman (MoffettNathanson LLC): How do you characterize competitive environment and promotional intensity? Update on legislative front for prediction markets?
  Response: Promotional environment is rational. On legislation, prediction markets are gaining traction, influencing states to consider OSB legalization, but outcomes are still uncertain.

• Question from Robin Farley (UBS Investment Bank): How much EBITDA loss is built-in for Predictions start-up costs? Are new state launch costs included in guidance?
  Response: No Predictions revenue in guide; start-up costs are tens of millions in fixed and incremental marketing. New state launches (Maine iGaming, Alberta) are included in guidance.

• Question from Robin Farley (UBS Investment Bank): Does your sports data advantage provide a major edge over other prediction markets?
  Response: Yes, internal data and historical databases, combined with in-house pricing models, provide a significant advantage for combination trading and market-making.

• Question from William Lampen (BTIG, LLC): Have you seen uptick in promotional intensity from smaller operators? Is that reflected in guidance?
  Response: No significant promo surge seen; guidance includes cushion but assumes a rational competitive environment.

• Question from William Lampen (BTIG, LLC): Is there flexibility to use national inventory for Predictions while maintaining core customer LTV/CAC?
  Response: Yes, flexibility exists; rollout is measured to evaluate customer value, with appropriate marketing spend to capture long-term value.

• Question from Jordan Bender (Citizens JMP Securities): Who are prediction market players? Any factors behind NFL handle underperformance?
  Response: Prediction players are mostly Californians and Texans, similar to existing customers. NFL handle dip is attributed to improved net revenue margins and promo optimization, not match-ups.

Contradiction Point 1

Investment and Revenue Outlook for Prediction Markets

Contradiction on whether investment is cautious or aggressive, and if revenue is included in guidance.

What are your key insights? - Daniel Politzer (JPMorgan Chase & Co)

2025Q4: Investment will be incremental... Marketing spend will be competitive... Predictions add no revenue to the guide (assumed to be a spend year). - [Jason Robins](CFO)

Why are you increasingly focusing on prediction markets, and what is the investment strategy for 2026? - Stephen Grambling (Morgan Stanley)

2025Q3: Investment will be measured... Will be data-driven with conservative initial assumptions on LTV and payback periods... Profitability outlook is cautious due to product infancy. - [Jason Robins](CFO)

Contradiction Point 2

Nature of Competitive Environment and Promotional Intensity

Contradiction on whether the competitive environment is rational/moderate or if there's a risk of becoming promo-driven.

What's your strategy for navigating current market conditions? - Robert Fishman (MoffettNathanson LLC)

2025Q4: The competitive environment is rational with moderate promo... On legislation, prediction markets are gaining traction... - [Jason Robins](CFO)

How would you describe the current competitive environment and promotional intensity, and can you provide an update on legislative developments for prediction markets? - Bernard McTernan (Needham & Company, LLC)

2025Q3: The risk of becoming promo-driven is present but managed through a focus on core value propositions. - [Jason Robins](CFO)

Contradiction Point 3

Predictions Market Strategy and Readiness

Strategy shifts from cautious monitoring to aggressive, capitalizing on regulatory clarity.

Can you provide an update on JPMorgan Chase's recent performance? - Daniel Politzer (JPMorgan Chase & Co)

2025Q4: Increased excitement is due to CFTC's active engagement and regulatory clarity... Investment will be incremental... Marketing spend will be competitive. - [Jason Robins](CEO)

What drives the increased focus on prediction markets, and what investment level is planned for 2026? - David Katz (Jefferies LLC)

2025Q2: The company is taking a measured approach, currently in a 'monitor mode' rather than active discussion phase. - [Jason Robins](CEO)

Contradiction Point 4

Customer Acquisition & Marketing Approach

Contradiction on primary customer acquisition strategy between new and established markets.

What are your key financial highlights for the quarter? - Brandt Montour (Barclays Bank PLC)

2025Q4: The initial December launch was a bare-bones product. The focus has been on building a competitive offering before aggressively marketing. - [Jason Robins](CEO)

What were the early results post-launch, and how will advertising for Predictions be handled in states where OSB is legal? - Jed Kelly (Oppenheimer & Co. Inc.)

2025Q2: The biggest opportunity is with the 'slots-first' player. The company is leading in cross-selling Sportsbook customers into iGaming... - [Jason Robins](CEO)

Contradiction Point 5

Promotional Activity and Market Environment

Contradiction on whether promotional intensity is increasing or remaining rational.

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2025Q4: The competitive environment is rational with moderate promo. ... No significant surge in promotional activity has been observed. - [Jason Robins](CEO)

Have you observed an increase in promotional activity from smaller sportsbook operators, and is that factored into the guidance? - Shaun Kelley (Bank of America)

2025Q1: There was a slight slowdown in handle growth in April relative to Q1, but it's still strong and is attributed to sports seasonality... Q2 handle growth is expected to be high single digits to low double digits. - [Jason Robins](CEO)