Cautious 2026 DraftKings guidance fuels stock selloff

In the wake of its first Super Bowl since launching a prediction market offering, the DraftKings business model could find a proverbial fork in the road.

As with its main rivals, DraftKings is bullish on the prospects of prediction markets, with CEO Jason Robins describing the new asset class as the most exciting “growth opportunity” for the sports betting industry since the 2018 PASPA decision. Robins is optimistic that prediction markets nationwide can morph into a $10 billion annual gross revenue opportunity, a category DraftKings intends to lead.

But DraftKings offered conservative guidance for its 2026 fiscal year on Friday’s quarterly earnings call, a similar playbook from the post-pandemic era when the company had yet to turn an annual profit.

DraftKings provided investors with cautious guidance on revenue and EBITDA in 2026, ones that fell well below projections modelled by Wall Street. The dim outlook raises questions about whether prediction market activity for leading operators will cannibalise volume on the online sports betting side.

Analysts further questioned whether DraftKings can achieve handle growth in the face of challenging inputs from prediction markets and volatile sports outcomes. As a result, DraftKings shares suffered a double-digit decline on the downbeat guidance, falling to their lowest levels in nearly three years.

Robins: PM activity a ‘de minimis’ impact on revenue

Robins addressed analysts five days after Super Bowl 60. The company launched DraftKings Predictions in December, several days before FanDuel rolled out a prediction market platform of its own.

On Super Bowl Sunday, DraftKings Predictions ranked second in app downloads in the category but still finished far behind Kalshi. Nevertheless, DraftKings surpassed its record for daily trading volume by a 3x factor, providing Robins with optimism for future growth.

Robins does not see prediction market cannibalisation to be an obstacle at the moment. In a letter to shareholders, he wrote that the most common question posed to the company of late surrounds a prediction category overlap with the sportsbook division. To underscore his point, Robins said DraftKings has not seen a discernible impact from the predictions division on revenue generation.

The DraftKings CEO cited third-party and internal data from January that he said suggests that the predictions category only slightly affected handle on the month. Within the category, he noted that predictions activity primarily touched low-margin customers.

“Consequently, the impact to our revenue has been de minimis,” Robins said.

In a Form 10-K filing with the US Securities and Exchange Commission, DraftKings wrote that consumer engagement with its prediction markets offering could fluctuate as a result of number of factors, including an ability to innovate and services offered by competitors.

Robins has become more bullish on prediction markets following a policy development from the US Commodities Futures Trading Commission. Last month, CFTC Chair Michael Selig outlined plans to establish clear guidelines on sports event contracts in the widest backing yet from the federal agency.

Analyst concern on DraftKings guidance

Nevertheless, some analysts expressed concern over January figures across the industry. While the majority of sportsbook operators saw OSB handle declines on the month, DraftKings managed to report modest gains. But a 4% increase in handle for January fell sharply below the 11% year-over-year gains from the same month in 2025, according to Citizens analyst Jordan Bender.

For fiscal year 2026, DraftKings introduced revenue guidance of $6.5-$6.9 billion. The midpoint of $6.7 billion is still 8% below Wall Street consensus estimates of $7.3 billion, with the lowest estimates topping the high end of DraftKings guidance, Bender wrote.

Other analysts pointed to DraftKings’ conservatism, as JP Morgan analyst Dan Politzer pressed Robins on the company’s “building blocks” for sports, in the face of “implied deceleration” on revenue.

There could be other reasons for DraftKings’ conservative approach to the new fiscal year. DraftKings set 2025 fourth-quarter records for revenue and adjusted EBITDA, with the former increasing by 43% to $1.9 billion.

While DraftKings topped the $6 billion threshold for annual revenue at $6.1 billion, the company still fell considerably below 2025 internal targets of $6.3 billion to $6.6 billion. DraftKings also missed the low end of its adjusted EBITDA outlook by more than $250 million.

Without alluding to prediction markets specifically, DraftKings listed cannibalisation as a risk factor to its business and to the industry in the filing.

“Even if our new product offerings attain market acceptance, those new product offerings have in certain cases cannibalised, and in the future could continue to cannibalise, the market share of our existing product offerings or share of our users’ wallets in a manner that may negatively impact our business,” DraftKings wrote.

A revised approach to annual guidance?

Robins lamented the rosy outlook from last February, informing analysts that it was “very frustrating” to miss their targets despite the double-digit gains. After consulting with his finance team, Robins remarked that missing those targets again is unacceptable and something the company is “not willing to do”.

It prompted to Robins to reassess DraftKings’ approach to annual guidance. He called back to DraftKings’ 2023 outlook when the company estimated a net loss for the year, despite projecting revenues of $2.85 billion to $3.05 billion. DraftKings posted revenues of $3.67 billion in 2023, while reporting adjusted EBITDA of a $151 million loss. The results beat estimates for losses between $350 million and $450 million for the 12-month period.

Although DraftKings CFO Alan Ellingson indicated that the company will invest considerably in the predictions category in an effort to efficiently acquire new customers, the company did not include a prediction market investment in its 2026 guidance. While analysts suggested that some of DraftKings’ competitors plan to spend $200 million to $300 million this year in the category, Robins said it is too early to come up with a firm number.

Gustavo Pifano, a portfolio manager at Gabelli Funds, told iGB that he does not consider an annual $100 million prediction market investment to be “excessive.”

DraftKings stock moves following earnings call

In Thursday’s after-hours session, DraftKings shares tumbled on the guidance, dropping 18% to around $20 a share. With the sell-off, DraftKings declined to its lowest level since May 2023.

The rise of prediction markets has dampened investor sentiment on leading sports betting companies. Since the start of the year, DraftKings is down about 26% as new entrants from the financial services space dive into sports waters. FanDuel parent Flutter has seen its shares decline approximately 36% year-to-date.

As of 1:50pm ET Friday, DraftKings traded at $21.78 a share, down approximately 13% from Thursday’s close. Last February, DraftKings surged about 10% after hosting a quarterly earnings call, trading near a 12-month high at $53.49 a share.

Matt Rybaltowski

Matt is primarily responsible for long-form feature coverage on complex sports betting scandals. He also provides coverage on finance, M&A and other technological developments.