DraftKings Raises Predictions Spend to $700m and Cuts 2026 EBITDA Midpoint by $575m

DraftKings will invest $650 million to $700 million in its Predictions product this year and on 5 November cut its 2026 adjusted EBITDA guidance to $175 million to $275 million, down from $700 million to $900 million. The company reported third‑quarter revenue of $1,329 million on 5 November and said the guidance reduction reflects a conscious spending decision on Predictions rather than a trading miss.

Quarter results and the guidance change

DraftKings reported third‑quarter revenue of $1,329 million, up 16% from $1,144 million a year earlier. The company recorded a net loss of $468.7 million, compared with $256.8 million in the prior-year quarter, and adjusted EBITDA was a loss of $316.9 million, against a $126.5 million loss a year earlier. Sales and marketing expense rose 68.1% to $605.7 million, which DraftKings attributes mainly to prediction market marketing and its Super App launch.

The 2026 full‑year revenue guidance has been narrowed to $6.35 billion to $6.55 billion, down from the prior range of $6.5 billion to $6.9 billion the company gave in May and August. Adjusted EBITDA guidance was cut to $175 million to $275 million, a reduction equal to $575 million at the midpoint from the previous midpoint. DraftKings says most of the reduction is intentional spend on Predictions; roughly $100 million of the cut comes from the core business, according to the company’s commentary on earlier CFO figures.

DraftKings now expects the core business to generate $875 million to $925 million of adjusted EBITDA in 2026; in August Chief Financial Officer Alan Ellingson had said the core was on track for about $1 billion.

Predictions: scale, economics and payback assumptions

More than 1.6 million customers have engaged with Predictions this year, the company said in its shareholder letter. Annualised consumer volume reached $10.1 billion in October, nearly three times the July level. DraftKings reported that across exchange fees, broker fees and market making, DKeX took 11.1% of consumer volume in September and October, and that DraftKings retained 65.6% of that take.

The company estimates the 2026 customer cohort will pay back in about 20 months on its model. DraftKings also presented a downside case in which sports contracts last until 31 July 2028; under that scenario it says the 2027 cohort would be more than half paid back by that date and fully paid back within four years if gross profit per customer falls to 20% of the level with sports.

DraftKings said Predictions revenue will be immaterial in 2026 because new customer promotions offset most gross revenue. For 2027 it expects to spend an additional $250 million to $350 million on Predictions and guides company revenue of $7.35 billion to $7.75 billion and adjusted EBITDA of $800 million to $1.0 billion. The company forecasts core adjusted EBITDA of $1.15 billion to $1.25 billion for 2027 and expects Predictions revenue of $650 million to $750 million that year.

Sportsbook and iGaming performance

DraftKings said sportsbook handle grew 12% year‑on‑year in the quarter and sportsbook net revenue rose 36%, which the company interprets as evidence that prediction markets had "no discernible impact" on its sportsbook business. Sportsbook margin improved by about 120 basis points to 6.4%, with hold above 11%.

iGaming revenue increased 2.1% to $460.9 million, while gross gaming revenue grew 7%; DraftKings said the difference was absorbed by promotions tied to a 76% rise in customer acquisition. Gaming taxes rose $64.4 million to $519.9 million in the quarter; the filing does not quantify Illinois' per‑bet charge or other state tax changes.

DraftKings said Predictions is being funded by the sportsbook. The company described the guidance cut as a spending choice and contrasted that with recent cuts at other operators that were driven by adverse sports results.

Market reaction and comparators

Market reaction was sharp: shares fell as much as 29% to $16.60 on 6 November, their lowest level since early 2023. DraftKings pointed to operational choices when explaining the guidance cut; industry comparisons highlight that DraftKings is spending more aggressively on Predictions than some peers.

Flutter plc, which operates FanDuel in the US, puts its 2026 prediction‑market loss at about $200 million, with 66,000 average monthly players and $119 million of volume in Q3. FanDuel's reported US sportsbook margin was 6.8%, compared with DraftKings' 6.4% in the quarter. DraftKings' public materials show a $350 million run‑rate gross profit figure in presentation slides and cohort curves that underlie the payback case.

Regulatory timing and political engagement

DraftKings framed its downside scenario around court timing. On the 6 November call, Chief Executive Jason Robins flagged a mid‑2028 Supreme Court ruling as the base case for his planning, according to InGame's reporting. The company said a ruling before mid‑2028, or increased state regulatory pressure, would reduce the time available for customer cohorts to pay back.

On 6 November DraftKings also replied to a congressional inquiry from Senator Richard Blumenthal and Representatives Paul Tonko and Valerie Foushee. In a six‑page letter the company said it "does not target anyone based on indicators of potential problem gambling" and stated that fewer than 1% of customers are in its Diamond and Onyx loyalty tiers. The letter declined to provide average losses for rewards members, calling that information "competitively sensitive."

What the company emphasises and what it leaves open

DraftKings argues the guidance reduction is largely the result of a deliberate decision to accelerate investment in Predictions and to fund that growth from the sportsbook. The payback case rests on internal modelling assumptions: a 20‑month payback for 2026 cohorts, an 11.1% take rate observed in September–October and the capture rate of 65.6% on that take. Those figures cover the early NFL season and the company notes "engaged" customers are not identical to continuously active customers.

For operators and investors seeking the concrete regulatory trigger that would change the plan, DraftKings points to the courts' timetable and potential state action as the key variables. The company says it will adjust Predictions investment to regulatory developments and expects the business to add to adjusted EBITDA in 2028.