DraftKings Reduces Financial Forecasts Amid ‘Customer-Friendly’ Sports Outcomes

Shares of DraftKings fell sharply on Thursday after the online sports betting and iGaming giant revised its earnings and revenue forecasts for 2024 downward, attributing the change to customers enjoying better-than-average results against the house in recent weeks. The company saw a 5.71% dip in after-hours trading, a notable reaction in a market highly sensitive to investor expectations.

In an investors call Friday, DraftKings executives stated that they now expect 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) to fall between $240 million and $280 million. Projected revenue will be in the range of $4.85 billion to $4.95 billion.

“While we experienced the most customer-friendly stretch of NFL sport outcomes we have ever seen early in Q4, which pressures our revenue and adjusted EBITDA in the short term, the overall trajectory of our business is strong.“

— DraftKings CEO Jason Robins

These figures mark a significant departure from the company’s prior forecast, issued in August. At the time, it predicted $340 million to $420 million in EBITDA and revenue between $5.05 billion and $5.25 billion.

The downward adjustment is the result of recent “customer-friendly” sports (and iCasino) outcomes. Still, the revised revenue outlook suggests an annual growth rate of 32% to 35%.

The stock’s decline following the announcement wasn’t isolated to DraftKings alone. FanDuel parent company Flutter Entertainment saw a nearly 3% drop, underscoring the broad ripple effect that DraftKings’ revised guidance had across the sports betting market.

Stronger long-term growth

The company also used the earnings update to issue its initial forecast for 2025, projecting revenue between $6.2 billion and $6.6 billion — representing year-over-year growth of approximately 31%, based on the midpoint of the 2024 guidance. DraftKings also confirmed its 2025 EBITDA target of $900 million to $1 billion, figures it had previously shared in August.

The company has signaled that this forecast does not yet include any potential contributions from Missouri, where a sports betting measure was just approved by voters. DraftKings is expected to launch its sportsbook platform in the state sometime next summer, pending necessary market access, licensing, regulatory, and contractual approvals.

DraftKings’ third-quarter results were bolstered by a surge in player activity with the start of the football season, a key driver for the sports betting sector. The company reported a 39% increase in revenue compared to the same period last year, reaching $1.09 billion.

Monthly Unique Players (MUPs) — a critical metric — rose 56%, highlighting the company’s growing customer base, spurred in part by DraftKings’ $750 million acquisition this year of online lottery platform Jackpocket. Excluding Jackpocket’s influence, MUP growth for the quarter still reached 27%.

However, the addition of Jackpocket to DraftKings’ product portfolio presented a mixed impact on revenue metrics. Jackpocket customers, who typically wager smaller amounts than standard DraftKings bettors, contributed to a 10% drop in average revenue per MUP (ARPMUP) during the third quarter. DK noted that excluding Jackpocket’s influence, ARPMUP would have risen by 8% year-over-year.

Continued U.S. expansion possible

The company was partially able to counterbalance the lower ARPMUP through improved sportsbook hold percentages, as well as more targeted promotional spending on its core sportsbook and iGaming services. By refining these areas, the company managed to increase its structural hold — the proportion of total bets retained as profit.

The forecast adjustments reflect the challenges and volatility inherent in the sports betting industry. Favorable betting outcomes for customers, while often temporary, can compress sportsbook margins, impacting revenue and profitability.

The revised guidance arrives as DraftKings seeks to further expand its U.S. market presence. The company remains focused on scaling its operations and increasing market share, driven by its recent acquisition activity and entry into new regions.

There could also be an opportunity to enter Florida. When asked about recent comments that Hard Rock may be willing to partner with major sportsbooks, DraftKings CFO Alan Ellingson stated that it’s possible, but that discussions are still very limited.

In addition to Missouri, the company has been eyeing several other states for expansion. However, when asked about international growth, DraftKings indicated that significant expansion outside the U.S. is not yet a major consideration.

One of the areas it could explore to reach that goal is political betting. During the conference call, Ellingson acknowledged the pervasive nature of the segment and admitted that the company is willing to explore it. “The market within that’s dominant is election markets, of course, and particularly during presidential elections,” Ellingson said. “So, definitely something we’re looking at in advance of the next presidential election, and potentially, it will be an opportunity to look at something sooner.”