DKNG Q2 2025: Revenue up 37% to $1.51B, record $300M EBITDA
- Record-breaking Q2 performance: DraftKings posted 37% YoY revenue growth with revenue at $1.513B and delivered a record adjusted EBITDA of over $300M, highlighting strong operational execution and profitability momentum.
- Robust live betting and innovation: The company’s focus on product enhancements—including a best-in-class live betting product integrated with SimpleBet’s technology—is driving increased customer engagement and offers significant top-line upside potential.
- Positive fiscal and expansion outlook: Maintaining FY25 guidance near the high end of its revenue and adjusted EBITDA ranges and anticipating boosts from upcoming state launches (e.g., Missouri) along with continued cost and efficiency initiatives strengthens the long-term bull case.
- Regulatory and Tax Uncertainty: The Illinois wager tax is unprecedented, and there's uncertainty around whether it will be treated as a pass‐through (non-taxable) or as taxable revenue. This ambiguity could force adjustments in pricing or negatively impact margins if the tax burden becomes greater than expected.
- Challenges in iGaming Growth: Despite momentum, the iGaming segment is not yet performing at the desired level and still faces headwinds. This slower-than-expected ramp-up, paired with heavy reliance on promotion adjustments, raises concerns about its future contribution to overall revenue.
- Dependence on Favorable Sports Outcomes: A considerable portion of growth and adjusted EBITDA has been driven by sportsbook-friendly outcomes and related promotions. Should sports outcomes or promotional efficiencies deteriorate, it could adversely affect revenue growth and profitability.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | no prior guidance | Expected to be in the range of $6.2 billion to $6.4 billion | no prior guidance |
Adjusted EBITDA | FY 2025 | no prior guidance | Expected to be in the range of $800 million to $900 million | no prior guidance |
Sportsbook Net Revenue Margin | FY 2025 | no prior guidance | Now expected to exceed 7.5% | no prior guidance |
Adjusted Gross Margin | FY 2025 | no prior guidance | Expected to be 46% | no prior guidance |
Stock-Based Compensation Expense | FY 2025 | no prior guidance | Expected to represent 6% of revenue | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Expected to be approximately $750 million | no prior guidance |
Missouri Mobile Sports Betting Launch | FY 2025 | no prior guidance | Includes the anticipated financial impacts, expected later in the year | no prior guidance |
Tax Rate Impacts | FY 2025 | no prior guidance | Accounts for higher tax rates in New Jersey, Louisiana, and Illinois | no prior guidance |
Exclusions | FY 2025 | no prior guidance | Does not include the potential launch of a predictions market offering | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Regulatory and Tax Uncertainty | Q4 2024 focused on state budget processes, legalization efforts and mitigation of Illinois tax effects. Q3 2024 centered on Illinois tax adjustments and promotional measures. | Q2 2025 provided a more detailed discussion on the Illinois per-wager tax, higher tax rates in multiple states, market access agreement renegotiations, and micro‐betting legislation. | Consistent concern but now with a more granular focus on specific tax challenges and mitigation strategies; sentiment remains cautious as changes could significantly impact future performance. |
Live Betting Investment and Innovation | Q4 2024 highlighted investments in live betting, including the SimpleBet acquisition and expectations for EBITDA impact. Q3 2024 emphasized SimpleBet integration to enhance micro‐betting and live betting offerings. | Q2 2025 stressed product leadership through enhanced live betting features, integration of SimpleBet for the upcoming NFL season, and use of AI to optimize trading operations, resulting in increased live betting handle. | Consistent focus with deepened technology integration and innovation; the sentiment is upbeat as improved live betting performance is expected to drive growth. |
Customer Acquisition, Retention, and Engagement | Q4 2024 reported record acquisition (3.5 million new customers, Jackpocket integration) and strong engagement metrics. Q3 2024 discussed unexpectedly strong acquisition, cautious promotional budgeting, and retention optimizations. | Q2 2025 emphasized efficient in‐game customer acquisition via live betting, strong cost control through expense management, and leveraging market access deals to boost retention, underpinning robust FY2025 guidance. | Consistent growth strategy with an evolving focus on efficiency and higher engagement from existing customers; sentiment remains positive and strategic for long‑term value creation. |
Geographic Expansion and Market Diversification | Q4 2024 centered on opportunistic international expansion, focus on the U.S. and Canada, and integration of digital lottery with Jackpocket. Q3 2024 regarded international expansion as opportunistic given solid domestic growth. | Q2 2025 emphasized domestic expansion with the anticipated Missouri launch, diversification via Jackpocket across 18 states (noting the Texas loss), and renegotiation of older market access agreements with state‑specific tax strategies. | A shift from international opportunism to concentrated domestic geographic diversification; sentiment is balanced as the strategy supports mitigating regional tax impacts while driving growth. |
Promotional Spending and Cost Management | Q4 2024 discussed a planned decline in promotional intensity, strategic reallocation (e.g. for Jackpocket), and cost optimization to support EBITDA margins. Q3 2024 detailed improved promotional reinvestment rates, reduced customer acquisition costs and structural adjustments in promo strategy. | Q2 2025 continued the focus on promotional efficiency boosted by nearly 600 basis point improvement, utilization of AI for cost optimization, and resulting increased adjusted gross margins, reinforcing cost discipline. | Progressive cost management efforts continuing across periods with further technological enhancements; sentiment is positive as margins improve and promotional spending becomes more efficient. |
iGaming Growth Dynamics | Q4 2024 emphasized a decline in promotional intensity, strong brand building (Golden Nugget) and effective Jackpocket cross‑selling. Q3 2024 noted steady iGaming revenue growth (26% YoY), maintained promotional velocity and high product quality rankings. | Q2 2025 reported 23% YoY revenue growth in iGaming, driven by strong active customer growth, effective cross‑selling from sportsbook to iGaming and boosted engagement with jackpots. | Consistent positive momentum with sustainable growth dynamics; sentiment is optimistic as the company refines customer segmentation and cross‑selling opportunities to drive further iGaming expansion. |
Dependence on Favorable Sports Outcomes | Q4 2024 mentioned that margins were impacted by customer‑friendly outcomes and guidance excluded these benefits. Q3 2024 described volatility from sports outcomes with expectations of normalization over the long term. | Q2 2025 highlighted that favorable sportsbook outcomes added $110 million in revenue and pushed hold above 11.5%, reinforcing strong quarter performance despite inherent volatility. | Volatility remains a recurring theme but the current period shows beneficial short‑term impacts; sentiment is cautiously optimistic as the normalization trend is expected over time. |
Financial Performance and Future Guidance | Q4 2024 showed strong financial performance with record revenue, improved EBITDA and raised FY guidance, despite some volatility. Q3 2024 discussed revenue growth with adjustments due to volatility but maintained confidence in future guidance. | Q2 2025 delivered record revenue and adjusted EBITDA with a 37% revenue boost and 20% EBITDA margin, while maintaining robust FY2025 guidance on revenue and EBITDA along with margin and free cash flow targets. | Overall financial performance has strengthened with more aggressive guidance; sentiment is highly positive, reflecting improvements in key metrics and sustainable profitability improvements. |
Technology Integration Partnerships | Q4 2024 focused on the SimpleBet acquisition and its role in enhancing live betting while noting EBITDA neutrality in 2025. Q3 2024 described progress with SimpleBet integration leading to product differentiation in live betting. | Q2 2025 highlighted full integration of SimpleBet for the upcoming NFL season, reinforcing live betting leadership and underpinning strategic technology investments. | Steady integration with continued emphasis on leveraging SimpleBet benefits; sentiment is optimistic as the partnership strengthens product offerings and competitive differentiation. |
Revenue and EBITDA Volatility | Q4 2024 acknowledged revenue and EBITDA volatility driven by sports outcomes and promotional fluctuations, with adjustments made in guidance. Q3 2024 noted short-term volatility with expectations for long‑term normalization. | Q2 2025 reported record revenue and EBITDA despite noting short‑term volatility from sports outcomes, while maintaining stable fiscal guidance and margin improvements. | Volatility remains inherent due to sports outcomes, but stronger overall performance and robust guidance reduce the relative impact; sentiment remains cautious yet positive regarding long‑term stability. |
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EBITDA Guidance
Q: Explain FY25 EBITDA outlook?
A: Management reaffirmed FY25 EBITDA guidance with a Missouri launch EBITDA impact of $35–$45M and noted that robust sports outcomes helped drive performance, keeping the mid‐point guidance intact. -
Illinois Wager Tax
Q: How are wager surcharges taxed?
A: They described the Illinois surcharge as intended to be a pass‐through, though uncertainty remains if it will be treated as taxable revenue, which may force pricing adjustments if necessary. -
Missouri Launch & CAC
Q: What pace for Missouri launch CAC?
A: Management expects the Missouri launch to mirror previous state rollouts with a potentially faster ramp due to the NFL season, promising strong customer acquisition and efficient CAC, similar to historical mid-single digit activation rates. -
Live Betting Conversion
Q: How does live betting boost conversion?
A: They emphasized that enhanced personalization and extending the in-play window allow customers to engage even after a game starts, thereby increasing conversion, while their integration of new AI tools holds promise for further top-line gains. -
Prediction Markets Outlook
Q: What’s the prediction market opportunity?
A: Management is cautiously monitoring the nascent prediction markets space—using current live sportsbook benchmarks as proxies—without committing to a concrete strategy yet, reflecting a measured approach while evaluating technology and regulatory factors. -
Cost Optimization
Q: Can cost efficiencies improve margins?
A: They identified considerable upside in streamlining state access fees, data rights fees, and automating manual processes, all of which contribute to easing cost pressures while bolstering margins over time. -
Customer Mix Trends
Q: What is the current customer mix?
A: Management noted that although unique user growth was flat due to geographic shifts (e.g., losing Jackpocket Texas), the overall 80/20 customer spend split remains healthy and diversified across millions of bettors. -
Market Access Deals
Q: Will market access deals be renegotiated?
A: They see potential upside by reworking older long-term market access agreements, positioning these adjustments as a key lever in optimizing the COGS stack. -
Micro Betting Risk
Q: How risky is a micro betting ban?
A: Management views the risk as minimal because even though micro betting constitutes a single-digit percentage of live handle, proposed bans are unlikely to progress given New Jersey’s broader competitive environment. -
SimpleBet Integration
Q: What is SimpleBet’s impact on in-play betting?
A: The integration of SimpleBet has strengthened their live betting product, with management confident that having the full SimpleBet team on board will yield measurable benefits throughout the NFL season.
Research analysts covering DraftKings.