DraftKings Turned Profitable in 2025 and the Stock Fell Anyway — Prediction Markets Explain the Gap

On February 12, 2026, DraftKings put its best year ever on the record. Fourth-quarter revenue rose 43% to just under $2 billion; full-year revenue hit a record $6.05 billion, up 27%; adjusted EBITDA more than tripled to $620 million; and the company reported its first full-year profit in its history — $3.7 million of net income against a $507 million loss the year before. That is the tape of a business that unmistakably improved.

Here is the other tape. The stock fell about 35% over 2025, and the slide did not stop there: from a September 5, 2025 peak near $49, the shares now trade in the low $20s, roughly half off the high and only a few dollars above a 52-week low near $20.46. On the latest daily reads the stock sat below its 50-day and 200-day moving averages with a relative strength index near 35, at the edge of oversold, and retail accounts were net sellers on the most recent flow print.

The two records disagree, and they disagree with Wall Street too. This week's consensus of analysts covering the stock is still a Buy, with a mean price target around $34 to $35 — roughly 60% above where the shares trade — and a range that runs from $20 at the low end to $76. When a company reports its best year and its chart its worst, a market is pricing something the income statement cannot show. For DraftKings, that something has a name: prediction markets.

The selling has a name

An investor reading the tape wants to know where the exit came from, and the record points to a shift in which "container" the market believes the money lives in. Over the past year, the fastest-growing place to bet on an outcome is no longer a state-licensed sportsbook but a federally regulated event-contract platform — Kalshi and Polymarket chief among them. The scale is no longer an experiment: combined monthly prediction-market volume reached roughly $50.6 billion in July 2026, against an estimated $14 billion a month at legal U.S. sportsbooks, and Kalshi alone had cleared more than $100 billion in cumulative volume by early 2026.

The structural reason this cuts at a sportsbook's economics is that prediction contracts are regulated by the Commodity Futures Trading Commission, which in most states has let them sidestep the licensing, tax, and age-verification burdens licensed books carry. Kalshi was fined $5 million in Ohio for evading that state's 20% sports-betting tax, and these platforms operate in big states like California and Texas where DraftKings cannot legally take a bet at all. The threat is aimed at the most profitable part of the business: parlays account for roughly 70% of sportsbook revenue and up to 85% of its profit, carrying a structural hold of 10–14% versus 5–7% on straight bets. If the marginal better moves containers, the highest-margin product is what is exposed — and attention moved with the container when LeBron James left a DraftKings relationship for a $15 million partnership with Polymarket.

That is the bear case in full: a tax-free, less-regulated rival scaling faster than the licensed book that must price state levies and compliance into every bet. But the counterevidence keeps this a contested map rather than a one-way migration.

DraftKings is fighting inside the container

The company is not only defending its old container — it quietly built its own. DraftKings launched a federally regulated predictions platform in December 2025, and management said its annualized volume reached roughly $11 billion by mid-2026. It is, in effect, walking into the market that is attacking it.

The legal ground then shifted. In August 2026, a federal appeals court ruled that states may regulate prediction markets as gambling — a setback for Kalshi and its peers, and a potential reprieve for licensed sportsbooks, even as it constrains DraftKings' own prediction push. New Jersey has asked the Supreme Court to settle which regulator wins. None of this is settled: the appeals-court setback is one decision in a fragmented fight, not a final answer.

One more wrinkle belongs in the record: the "improved business" story cracked on its own in 2026. In the second quarter, revenue fell 4.6% year over year to $1.44 billion — the first decline — and DraftKings swung to a net loss of $67.6 million from a $157.9 million profit a year earlier, with adjusted EPS of $0.09 missing the $0.19 consensus. Management blamed a season-heavy calendar, customer-friendly sports outcomes, and higher promotional and acquisition spending, and said it sees no discernible impact from prediction markets on its sportsbook. But the guidance it issued in February — $6.5 billion to $6.9 billion in 2026 revenue, about 8% short of what Wall Street had modeled — was set deliberately conservatively, and the market read the deceleration as the point.

So the bullish price targets are not a prediction of the current direction; they are a forecast about how the container question resolves. A consensus target in the mid-$30s requires the parlay moat and the licensed model to survive, and reported growth to resume through football season; a $20 low target prices in the opposite outcome. An investor who wants the upside analysts are circling has to believe DraftKings' economics hold against a tax-free rival the courts may be about to fence in.

Two prints will update this record, and until one lands the divergence is the story. The first is the reported tape: whether the revenue decline reverses in the quarterly result due November 5 as football season arrives. The second is the map: whether the Supreme Court will weigh in on the unresolved federal-versus-state question over prediction markets — an answer that could decide if we are watching the speculative premium migrate to a new container, or a detour that ends with the licensed book still holding the field. Until then, the gap between the best financial year DraftKings has ever reported and the worst chart it has traded is not a mystery to solve or a bottom to call. It is the open question the stock has been pricing all along.