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DraftKings Inc. (DKNG)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue grew 20% year-over-year to $1.409B, but modestly missed S&P Global consensus; Adjusted EPS of $0.12 was a significant beat vs Street expectations *.
  • Management lowered FY2025 guidance to $6.2–$6.4B revenue and $800–$900M Adjusted EBITDA, citing customer‑friendly March outcomes and tax/regulatory headwinds (Maryland rate increase; Jackpocket exits in TX/NM), while emphasizing stronger structural hold and promotional efficiency .
  • Core metrics improved: structural Sportsbook hold rose to 10.4%; adjusted gross margin reached ~45% amid rising parlay/live adoption; MUPs grew 28% to 4.3M (ex‑Jackpocket +11%), ARPMUP $108 (ex‑Jackpocket +7%) .
  • Stock reaction catalyst: Large EPS beat and Q2 guide (> $200M Adjusted EBITDA) juxtaposed with lowered FY guide; narrative centers on random outcome volatility vs. strengthening fundamentals (structural hold, promo efficiency, live betting) .

What Went Well and What Went Wrong

What Went Well

  • Rising structural hold and promo efficiency lifted adjusted gross margin to ~45%, despite unfavorable sports outcomes .
  • Strong customer acquisition and engagement; MUPs +28% YoY to 4.3M; ex‑Jackpocket +11% YoY; ARPMUP steady ex‑Jackpocket (+7%) .
  • Management confidence in randomness of outcome volatility; quote: “We are 100% confident that these are random outcomes... structural hold and hold should converge over time.” — Jason Robins .

What Went Wrong

  • Customer‑friendly March outcomes (NCAA tournament favorites historic win rates) pressured revenue/EBITDA and led to lowered FY25 guide .
  • ARPMUP −5% YoY to $108 due to lower Jackpocket ARPMUP vs core DK customers .
  • Tax/regulatory headwinds (Maryland tax increase; Jackpocket exiting TX/NM) cited as ~$30M revenue and ~$26M Adjusted EBITDA drags on FY25 .

Financial Results

Consolidated Results vs Prior Periods and Estimates

MetricQ3 2024Q4 2024Q1 2025
Revenue ($B)$1.095 $1.393 $1.409
Revenue Consensus* ($B)$1.111*$1.394*$1.426*
GAAP EPS ($)−0.60 −0.28 −0.07
Adjusted EPS ($)−0.17 0.14 0.12
EPS Consensus* ($)−0.410*−0.176*−0.070*
Adjusted EBITDA ($M)−58.5 89.5 102.6
Adjusted Gross Margin (%)40% 45% ~45%

Values marked with * retrieved from S&P Global.

Interpretation:

  • Q1 2025: Revenue slight miss vs consensus; Adjusted EPS major beat *.
  • Q4 2024: Revenue in line/slight miss; Adjusted EPS beat *.
  • Q3 2024: Revenue miss; Adjusted EPS beat *.

Segment / Revenue Disaggregation (Q1 2025)

ComponentQ1 2025
Sportsbook Handle ($B)$13.88
Sportsbook Revenue ($M)$881.96
Sportsbook Net Revenue Margin (%)6.4%
iGaming Revenue ($M)$423.47
Other Revenue ($M)$103.38
Total Revenue ($M)$1,408.81

KPIs Across Quarters

KPIQ3 2024Q4 2024Q1 2025
MUPs (avg monthly unique payers, M)3.6 4.8 4.3
ARPMUP ($)103 97 108

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025$6.3–$6.6 (Feb 13) $6.2–$6.4 (May 8) Lowered
Adjusted EBITDA ($B)FY 2025$0.9–$1.0 (Feb 13) $0.8–$0.9 (May 8) Lowered
Sportsbook net revenue margin (%)FY 2025NA7.0–7.5 Introduced
Adjusted gross margin (%)FY 202545–47 (Feb 14) ~46 Slightly higher midpoint vs prior quarter detail
Stock-based comp (% revenue)FY 2025~6% ~6% Maintained
Free Cash Flow ($M)FY 2025~850 (Feb 14) ~750 Lowered
Q2 2025 Revenue YoYQ2 2025NA~+25% YoY New quarterly color
Q2 2025 Adjusted EBITDA ($M)Q2 2025NA>$200 New quarterly color

Note: Management cited customer‑friendly outcomes and tax/regulatory changes as drivers of the FY25 guidance reductions .

Earnings Call Themes & Trends

TopicQ3 2024 (Nov-2024)Q4 2024 (Feb-2025)Q1 2025 (May-2025)Trend
Structural vs actual holdGuided ~11% FY25 structural hold; outcome volatility acknowledged Structural 11.2% in Q4; strong parlay mix lift Structural 10.4%; actual 9.5%; volatility deemed random; convergence expected Improving structural; actual volatile but expected to converge
Live betting & productProduct improving; SGP mix up 500bps in NFL; strong NBA features Focus area for 2025; acquisitions (Simplebet, SportsIQ) to accelerate; record Super Bowl live metrics Live >50% of handle; MLB live +36% YoY; deeper live roadmap Acceleration; adoption rising across sports
Promotional intensityDown ~300bps YoY; optimizing lower‑LTV cohorts Expect meaningful decline in 2025; programmatic buybacks More efficient reinvestment; improving adjusted gross margin Downward trajectory
Regulatory/taxIllinois mitigation in promo; broader legalization outlook FY25 excludes new launches; monitoring taxes; debt market exploration Maryland tax increase; Jackpocket exits TX/NM; IL fee announced post‑Q1 Mixed headwinds; proactive response
AI/technology initiativesProduct advancement; hold/mix moves Emphasis on live/tech stack; operational leverage “AI-first” movement across org; efficiency in CS, docs; early risk/pricing use cases Broad adoption; efficiency gains

Management Commentary

  • “If not for customer‑friendly sport outcomes in March, we would be raising our fiscal year 2025 revenue and adjusted EBITDA guidance.” — Jason Robins .
  • “Structural Sportsbook hold percentage of 10.4% outperformed our expectations… actual Sportsbook hold percentage was 9.5%.” — Alan Ellingson .
  • “Live betting is up significantly… first time live exceeded 50% of total handle.” — Jason Robins .
  • “We expect adjusted EBITDA to exceed $200 million in Q2.” — Alan Ellingson .
  • “We repurchased 3.7 million shares in the first quarter under our existing program.” — Alan Ellingson .

Q&A Highlights

  • Structural vs actual hold: Management reiterated outcome randomness and convergence; models will adapt if sports dynamics shift (e.g., NIL theories) .
  • Live betting/product: Strong momentum across MLB/NBA; Simplebet integration to drive top‑of‑market live; micro‑betting holds managed by bet type .
  • Promotions: Efficiency improvements by lowering support to lower‑LTV cohorts; continued decline expected as mix matures .
  • M&A/Capital allocation: Opportunistic tuck‑ins that reduce cost (Simplebet, SportsIQ); programmatic buybacks; debt market presence for flexibility .
  • Regulatory: Tax increases risk illegal market share; IL transaction fee announced after Q1 (effective Sep 1, 2025) .

Estimates Context

  • Q1 2025: Revenue $1.409B vs consensus $1.426B* (slight miss); Primary EPS $0.12 vs consensus −$0.070* (beat)*.
  • Q4 2024: Revenue $1.393B vs consensus $1.394B* (in line/slight miss); Primary EPS $0.14 vs consensus −$0.176* (beat)*.
  • Q3 2024: Revenue $1.095B vs consensus $1.111B* (miss); Primary EPS −$0.17 vs consensus −$0.410* (beat)*.
QuarterActual Revenue ($B)Consensus Revenue* ($B)Actual Primary EPS ($)Consensus Primary EPS* ($)
Q3 2024$1.095 $1.111*−0.17 −0.410*
Q4 2024$1.393 $1.394*0.14 −0.176*
Q1 2025$1.409 $1.426*0.12 −0.070*

Values marked with * retrieved from S&P Global.

Implications: Street likely revises up EPS trajectory (non‑GAAP primary EPS) while keeping revenue cautious given outcome volatility narrative; Q2 >$200M Adjusted EBITDA may prompt upward near‑term EBITDA revisions .

Key Takeaways for Investors

  • Core drivers strengthening: rising structural hold, promo efficiency, and live/parlay mix support margin trajectory, even as outcomes fluctuate .
  • FY25 guide reset reflects outcomes and policy headwinds, not deterioration in fundamentals; management described March impact as random and transitory .
  • Q2 setup constructive: revenues ~+25% YoY and Adjusted EBITDA >$200M guide could be a positive catalyst for estimate revisions and sentiment .
  • Live betting is a multi‑year growth vector; acquisitions should accelerate product capability and adoption across NFL/NBA/MLB .
  • Watch regulatory developments: IL fee post‑Q1 underscores tax pass‑through strategies; state tax hikes risk illegal market share growth; monitor Maryland/Illinois effects .
  • Capital allocation turning constructive: ongoing buybacks; potential debt market access adds flexibility as FCF scales .
  • Trajectory: expect continued adjusted gross margin improvement (~46% FY25), structural hold approaching/above ~11% in H2, while consensus EPS likely moves higher given repeated beats .
Notes:
- All S&P Global consensus values are marked with * and sourced via S&P Global.