Quick Read
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DraftKings and Flutter are bleeding profit to fund prediction-market products, as DraftKings pours $650 million to $700 million into Predictions and slashes its 2026 EBITDA outlook.
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DraftKings' 2027 EBITDA guidance of $800 million to $1 billion trails the $1.12 billion Wall Street expected, and its stock has halved this year.
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Jason Robins says Predictions customers pay back in about 20 months, but a Supreme Court ruling on sports contracts could upend that math, while MGM stays largely insulated.
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The cost of competing in prediction markets is hitting DraftKings( NASDAQ:DKNG ) hard after its third-quarter report and first 2027 forecast both fell short of Wall Street's hopes. DraftKings stock is trading at $17.13, down 27%. That decline adds to a steep slide in extended trading after the company released its results following the close on November 5.
This selloff leaves DraftKings stock down 50% year to date. Tech is rallying after a strong October jobs report showed 165,000 jobs added, with the NASDAQ 100 up 2% while the Dow Jones Industrial Average is down 0.6%, so DraftKings is moving on its own news. The company is spending heavily on DraftKings Predictions, its event-contract product supervise by the Commodity Futures Trading Commission, as it competes with Kalshi and Polymarket.
DraftKings' 2027 Forecast Falls Short as Predictions Costs Mount
DraftKings guided 2027 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to a range of $800 million to $1 billion. Analysts surveyed by Bloomberg had expected an average of $1.12 billion. On the top line, DraftKings cut its fiscal 2026 revenue range to $6.35 billion to $6.55 billion, from $6.5 billion to $6.9 billion.
For 2026, DraftKings now sees adjusted EBITDA of $175 million to $275 million, down from $700 million to $900 million. Most of that reduction, DraftKings explained, reflects increased adjusted EBITDA investment in predictions of $650 million to $700 million.
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Third-quarter revenue at DraftKings grew 16.2% year over year to $1.33 billion in its quarterly release, missing the $1.39 billion that analysts cited by Bloomberg expected. Wall Street had expected a much smaller adjusted loss than the -$0.53 per share DraftKings posted. Monthly unique payers at DraftKings rose 13% to 4.1 million, exceeding the 4 million projection from analysts cited by Bloomberg. CEO Jason Robins called the quarter a turning point. He stated, "The third quarter marked a pivotal moment for DraftKings, as the Predictions offering we have been building is now powering meaningful growth for our business." Investors focused instead on the weaker outlook.
Flutter Entertainment and Penn Entertainment Follow DraftKings Lower
Traders appear to be applying DraftKings' spending warning to its closest rival. Flutter Entertainment( NYSE:FLUT ) stock is at $76.61, down 8%. DraftKings and Flutter's FanDuel both face customer-friendly sports outcomes and competition from prediction-market operators, and each launched an expensive prediction product, mainly in states without legal online sportsbooks.
On November 4, Flutter reported its own third-quarter results, including an $873 million non-cash impairment tied to Brazil and a cut to its 2026 guidance. Speaking on that day's call, CFO Robert Coldrake stated the company expects prediction-market investment "to continue at similar or higher levels, given the early momentum we are seeing."
Penn Entertainment( NASDAQ:PENN ) stock is at $16.73, down 4%. That decline runs against Penn's November 5 report, which showed adjusted earnings of $0.32 per share, well ahead of estimates. Aaron LaBerge, who led the company's interactive business at the time of the call, declared, "We're not getting sucked into the noise of prediction markets."
How DraftKings' All-Digital Model Stands Apart
DraftKings is a pure-play digital operator, running its sportsbook, online casino, Jackpocket lottery app and Predictions with no casino floor to cover heavy spending, while Flutter pairs FanDuel's U.S. leadership with a large international portfolio, which spreads its risk but adds tax and regulatory pressure abroad.
Penn leans on regional casinos such as Hollywood Casino and Ameristar, while steering its online push toward iCasino and Canada. MGM Resorts( NYSE:MGM ) is mainly a brick-and-mortar resort operator. Its digital exposure comes through a joint venture, and that leaves it the least tied of the group to the prediction-market fight.
Can DraftKings' Predictions Push Pay Off?
DraftKings now faces the question of whether Predictions customers begin contributing meaningful gross profit in 2027, as management expects. Robins noted the 2026 cohort is on pace to pay back in "approximately 20 months, well below our two-year payback target," and the company disclosed it has held its cash near $1.1 billion through the investment cycle.
Regulation is a main risk on the other side. A decision against those contracts could stretch paybacks. Management's base case assumes a Supreme Court ruling on sports predictions in mid-2028, while Flutter's CEO said prediction-market operators are already pushing up media costs. Shareholders can watch for Flutter's strategy update with its Q4 2026 results in February to see how its outlook compares. Caution may be warranted until the return from DraftKings' Predictions spending is clarified by the data.
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