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DraftKings (DKNG) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Consumer Discretionary· May 8, 2026

Source: earnings call transcript

Executive summary

DraftKings Q1 FY26 — Strong Start with Strategic Investment in Predictions

DraftKings delivered a strong Q1 FY26, exceeding expectations with robust revenue growth and significant adjusted EBITDA expansion, driven by its core Sportsbook business. The company is strategically investing $200M-$300M in its Predictions offering and Super App strategy, aiming for market leadership by year-end, while also focusing on accelerating iGaming growth and leveraging national partnerships for customer acquisition, particularly around the World Cup. Management also noted that Prediction Markets are helping legalization efforts and pushing back against tax increases.

Highlights

5

  • Revenue increased 17% year-over-year to over $1.6 billion.

  • Adjusted EBITDA increased 64% year-over-year to $168 million.

  • Sportsbook revenue increased 24% year-over-year to $1.1 billion.

  • Adjusted gross margins increased by nearly 200 basis points year-over-year.

  • Annualized Predictions consumer volume exceeded $1 billion in April, up 38% month-over-month.

Concerns

3

  • Significant investment in Predictions and Sportsbook launch in Arkansas impacted Q1 adjusted EBITDA by over $32 million (would have exceeded $200M without it).

  • iGaming growth decelerated to 9% quarter-over-quarter in Q1 FY26, compared to approximately 20% in FY25.

  • Planned Predictions investment for FY26 is $200 million to $300 million, impacting near-term profitability.

Guidance & targets

CategoryTargetConfidence
Fiscal Year 2026 Revenue
$6.5 billion to $6.9 billion
high materiality
High
Fiscal Year 2026 Adjusted EBITDA
$700 million to $900 million
high materiality
High
Predictions Investment
$200 million to $300 million
medium materiality
Medium
Long-term Adjusted EBITDA Margin
at least 30%
high materiality
Medium
Long-term Gross Revenue Opportunity
$55 billion to $80 billion
high materiality
Medium

Product announcements

ProductTypeDetails
Predictionslaunch
Market Makinglaunch
Proprietary Exchange and Combosroadmap
Spanish Language Functionalitylaunch
Flex Spinslaunch

Risks & headwinds

Significant investment in Predictions FY26

$200 million to $300 million for FY26

Mitigation:Strategic priority, expected to drive long-term adjusted EBITDA; investment is fluid and data-driven.

iGaming growth deceleration Q1 FY26

9% QoQ growth in Q1 FY26, compared to ~20% in FY25

Mitigation:Beefing up team, product enhancements (Flex Spins), new marketing assets, focus on iCasino-first players.

Customer losses in Predictions early stage

Early data suggests Predictions customers experience losses more quickly than Sportsbook customers

Mitigation:Focus on trust, consumer protections, operator discipline, building a healthy ecosystem; setting the standard for responsible management.

Unregulated Prediction Markets and irresponsible operators ongoing

Some predictions operators irresponsibly saying it's not the same as a product like ours

Mitigation:DraftKings aims to set the standard for responsible management and consumer protection.

Costs associated with new state launches Q1 FY26

Low double-digit millions in Q1 FY26 for Arkansas/Alberta

Mitigation:Contemplated in initial guidance; part of strategic expansion.

What to watch in Q2 FY26

Predictions investment and profitability

Q2 FY26 and back half of FY26
Current $200M-$300M planned for FY26; market making already profitable.
Target Continued strong CACs, increased investment, positive contribution from exchange.

Why it matters

This is a key strategic priority with significant investment, representing a massive incremental opportunity for the company.

at this point, we are thinking we're going to probably invest about $200 million to $300 million all in on Predictions this year. A lot of that will be marketing, but some of that will be product technology investment as well.

Find out whether DKNG delivers this. Inve re-checks your case every morning.

Q&A highlights

How should we think about layering in Predictions spend for the remainder of the year, especially marketing, given the Super App integration?

Jason Robins stated that they expect to invest $200M-$300M all-in on Predictions this year, with a lot of it being marketing and some product/tech investment. This implies the rest of the business will generate over $1B in adjusted EBITDA.

“at this point, we are thinking we're going to probably invest about $200 million to $300 million all in on Predictions this year. A lot of that will be marketing, but some of that will be product technology investment as well.”

asked by Jordan Bender · answered by Jason Robins

2 min read 6 chapters

Detailed narrative

Predictions Market Strategy

DraftKings is making significant investments in its Predictions offering, integrating it into the Super App, and planning to establish a leadership position by year-end. This includes launching a proprietary exchange and combos, and leveraging market making which is already profitable. The company views Sportsbook capabilities as a key advantage for Predictions due to shared infrastructure and customer base, aiming to define the category.

Core Business Strength & Efficiency

The core Sportsbook business remains strong, with revenue growth exceeding 20% across major sports and net revenue margin increasing by 140 basis points to 7.8%. The company is scaling efficiently, with adjusted gross margins up nearly 200 bps YoY and operating expenses increasing only slightly when excluding Predictions and Arkansas launch costs, driven by AI-first execution and streamlined teams.

iGaming Opportunity and Enhancements

Management acknowledges lagging iGaming growth (9% QoQ in Q1 FY26) but sees significant opportunity for acceleration. They are beefing up the team, making product changes like 'Flex Spins' (a unique promotion allowing free spins on any game), and focusing more on iCasino-first players rather than just OSB cross-sell, aiming to increase growth rates and unlock further potential.

Legalization and Advocacy Efforts

The company believes Prediction Markets are helping legalization efforts by highlighting the unregulated market, leading to increased momentum for OSB. They see strong iGaming momentum in the DMV area (Washington D.C., Virginia, Maryland) and potential in Midwestern states like Ohio and Illinois. Advocacy spend of $26 million in Q1 was for a super PAC strategy to influence elections and prevent tax increases, which has been successful so far.

World Cup Expectations and Spanish Language Offering

The upcoming World Cup is viewed as a tremendous opportunity for customer acquisition and engagement, particularly in states without legal sports betting (e.g., California, Texas, Florida) where DraftKings plans significant marketing. While not expected to be a huge revenue driver, it's a key event for expanding the user base. The recent launch of Spanish language functionality in the app is also expected to attract an incremental audience.

Market Making Profitability and Ecosystem Approach

DraftKings' market-making operation, launched in the last couple of months, is already profitable and considered one of their fastest profitability business lines. The company aims to scale it and participate on third-party platforms to maximize volume and risk management. They emphasize having the whole ecosystem (market making, exchange, consumer-facing) as it feeds off each other, with each layer offering tremendous value.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.