DraftKings shares crashed 24.5% in Friday's premarket trading after the sports betting operator slashed the midpoint of its 2026 adjusted EBITDA forecast to $225 million from $800 million. The mad dash into prediction markets overshadowed a 16% year-over-year increase in third-quarter revenue to $1.33 billion.
"In just a few months, we have become the clear number three Predictions exchange by Total Volume," CEO Jason Robins wrote in a letter to shareholders.
BofA Securities gaming analyst Julie Hoover attributed $475 million of the $575 million guidance cut to additional investment in prediction markets. The remaining $100 million reflected a lower adjusted EBITDA forecast for the core business.
Hoover wrote in her first take:
Q3 Miss and 2027 estimate reset
DraftKings (ticker: DKNG) reported Q3 revenue/EBITDA of $1.33/-316M vs. BofA $1.345B/-$100M and the Street's $1.393B/-66M. DKNG lowered their full year EBITDA guidance to $225M at midpoint vs. $800M, embedding $475M of incremental prediction market (PM) investment and $100M reduction to the core. For 2027, DKNG provided initial guidance of ~$800M-1B, including $300M of EBITDA loss related to PMs.
Bottom line: Shares of DKNG traded down -23% after the close on a bigger-than-expected 2027 numbers reset. Investors are disappointed by the magnitude of PM investment given the looming regulatory risk around sports event contracts. DKNG's desire to be best-in-class has driven i
