DraftKings cuts 2026 earnings outlook as prediction market spending rises

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DraftKings cuts 2026 outlook

Highlights

DraftKings cut its 2026 adjusted EBITDA guidance to $175 million–$275 million from $700 million–$900 million, citing up to $700 million in prediction market investments.
DraftKings' new 2027 adjusted EBITDA forecast of $800 million–$1 billion disappointed investors, falling short of Bloomberg consensus of about $1.1 billion.
DraftKings and rivals face intensifying competition and regulatory scrutiny in prediction markets, with Kalshi valued at $40 billion and new CFTC advisories complicating U.S. operations.

Guidance cut reflects expansion costs

As reported by Financial Times, DraftKings cut its 2026 adjusted earnings before interest, tax, depreciation and amortisation guidance to $175 million to $275 million, from an earlier $700 million to $900 million, as it increases spending on its prediction market business.

The company said it expects to spend up to $700 million to grow the product it launched last December. In a letter to shareholders, chief executive Jason Robins said DraftKings' prediction market offering is now "best-in-class", but warned that revenue from the business will be far outweighed by marketing costs this year.

Investors also reacted negatively to DraftKings' 2027 adjusted EBITDA forecast of $800 million to $1 billion. That falls short of the roughly $1.1 billion analysts had expected, according to data compiled by Bloomberg.

Competitive and regulatory pressure intensifies

DraftKings' move comes as gambling companies seek new growth avenues amid concern that prediction markets are taking share from the $17 billion sports-betting market. These platforms offer binary wagers on sports and other events, and because they are regulated federally as financial derivatives, they do not face the same restrictions as conventional gambling operators.

Competition in the segment is also accelerating. Flutter, owner of rival sportsbook FanDuel, also trimmed guidance on Wednesday, citing sports results that favoured bettors and a gambling ban in Brazil, while chief executive Dan Taylor told the FT that prediction markets are creating stronger competitive pressure through heavy marketing spending.

Kalshi and Polymarket, the two largest prediction market operators, have expanded their visibility through partnerships with high-profile figures including LeBron James and Timothée Chalamet. Kalshi said last week it had raised another $1 billion, valuing the company at $40 billion, more than triple DraftKings' $11.7 billion market capitalisation.

DraftKings also faces a new regulatory complication after the Commodity Futures Trading Commission said in an advisory on Thursday that prediction market operators should end domestic geographic restrictions on their products. DraftKings currently does not offer its sports event contracts in states that allow online sports betting, while states including Ohio and Massachusetts have said they will withdraw gambling licences from companies that offer prediction market contracts within their borders.

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