Executive Summary

Q3 revenue of $1.144B grew 4% YoY but missed S&P Global consensus ($1.2019B*), while Adjusted EPS of $(0.26) was roughly in line with normalized EPS consensus (−$0.2553*) and GAAP EPS of $(0.52) lagged primary EPS consensus (−$0.4122*) . Values retrieved from S&P Global.
Management cut FY25 guidance to $5.9–$6.1B revenue and $450–$550M Adjusted EBITDA (from $6.2–$6.4B and $800–$900M in August), citing more than $300M adverse sports outcomes in September/October and initial investments for “DraftKings Predictions” .
Underlying engagement remains strong: October Sportsbook handle +17% YoY; iGaming revenue +25% YoY in Q3; parlay mix up 800–1,000 bps season-to-date in NFL/NBA; MUPs 3.6M and ARPMUP $106 (+3% YoY) .
Capital allocation turn: Board doubled the share repurchase authorization to $2.0B; DKNG has repurchased 9.3M shares to date and expects to be active near‑term as FCF ramps .

What Went Well and What Went Wrong

What Went Well

Parlay and engagement tailwinds: “Parlay handle mix continues to surge,” up 800 bps NFL and 1,000 bps NBA season‑to‑date; October handle +17% YoY . “Our product’s never been better… features like stacks… ghost leg promotion… helped drive parlay mix” .
iGaming acceleration: Q3 iGaming revenue +24.9% YoY to $451.3M; management added new leadership and content roadmap; iGaming strength drove higher ARPMUP .
Strategic expansion vectors: Announced “DraftKings Predictions” pending licensure, supported by the Railbird acquisition (federally licensed CFTC exchange), seen as “a significant incremental opportunity” and TAM expander into non‑OSB states .

What Went Wrong

Outcomes-driven miss and margin compression: Sportsbook-friendly outcomes in Q2 flipped to customer-friendly outcomes in Sep/Oct, reducing revenue by “more than $300M,” depressing Q3 results (Sportsbook revenue −9.3% YoY; net margin 5.2%) and driving Adjusted EBITDA to $(126.5)M .
Guidance reset: FY25 revenue cut to $5.9–$6.1B and Adjusted EBITDA to $450–$550M (includes Missouri launch and initial Predictions spend), from $6.2–$6.4B and $800–$900M previously .
Investor concern on hold volatility: Analysts pressed on whether higher parlay mix raises hold volatility; management emphasized long‑term normalization but acknowledged concentrated event risk (NFL weekends) can swing quarterly results .

Financial Results

Quarterly actuals (chronological)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$1,408.8	$1,512.5	$1,144.0
GAAP EPS (Basic/Diluted)	$(0.07)	$0.30 diluted	$(0.52)
Adjusted EPS (Non-GAAP)	$0.12	$0.38	$(0.26)
Adjusted EBITDA ($USD Millions)	$102.6	$300.6	$(126.5)
Sportsbook Net Revenue Margin (%)	6.4%	8.7%	5.2%
MUPs (Millions)	4.3	3.3	3.6
ARPMUP ($)	$108	$151	$106

Q3 actual vs consensus

Metric	Q3 2025 Actual	Q3 2025 Consensus	Beat/Miss
Revenue ($USD Millions)	$1,144.0	$1,201.9*	Miss
EPS (Normalized/Adj)	$(0.26)	$(0.2553)*	In line
EPS (Primary/GAAP)	$(0.52)	$(0.4122)*	Miss
# of Estimates (Rev / EPS)	—	25 / 15*	—

Values retrieved from S&P Global.

Segment and operating mix

Metric	Q1 2025	Q2 2025	Q3 2025
Sportsbook Handle ($USD Millions)	$13,880.4	$11,474.8	$11,402.4
Sportsbook Revenue ($USD Millions)	$882.0	$997.9	$596.1
Sportsbook Net Revenue Margin (%)	6.4%	8.7%	5.2%
iGaming Revenue ($USD Millions)	$423.5	$429.7	$451.3
Other Revenue ($USD Millions)	$103.4	$85.0	$96.6
October Handle YoY	—	—	+17% YoY

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$6.2B–$6.4B (maintained in Aug)	$5.9B–$6.1B (includes Missouri + Predictions)	Lowered
Adjusted EBITDA	FY 2025	$800M–$900M	$450M–$550M	Lowered

Notes: Management cited >$300M adverse outcome impact in Sep/Oct; Q4 assumes measured Predictions spend; guidance now includes Missouri launch and Predictions, whereas Q2 guidance excluded Predictions .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
Sport outcomes / hold volatility	Q2: Outcomes added ~$110M revenue; records set; reminder outcomes normalize over time . Q1: Would have raised FY guide “if not for customer‑friendly outcomes in March” .	Sep/Oct outcomes reduced revenue by >$300M; NFL concentration drives quarterly swings; long‑term normalization re‑affirmed .	Volatility elevated near‑term
Parlay mix & live betting	Q2: Parlay mix +430 bps YoY; live handle +16% YoY; Simplebet driving live leadership .	NFL/NBA parlay mix +800–1,000 bps season‑to‑date; product features and promos (e.g., ghost leg) boosted mix .	Improving
Predictions markets	Q2: Monitoring opportunity; tech/first‑mover trade‑offs .	Launching “DraftKings Predictions” in coming months; Railbird acquisition for exchange; focus on non‑OSB states; measured CAC/payback .	Accelerating
AI / technology	Q2: Early benefits in COGS and fixed costs; targeted top‑line AI in trading, personalization .	Incremental AI investment in 2026+ benefit; some 2025 cost saves; Spanish‑language app ahead of 2026 World Cup .	Building
Media/partnerships	Q2: Open to sports streaming partnerships; market access renegotiation upside .	Exclusive marketing agreements with ESPN and NBCUniversal; broader NBA access; deeper brand reach .	Strengthening
Taxes/regulatory	Q2: Higher NJ/LA/IL tax rates in guide; IL per‑wager surcharge pass‑through under evaluation .	Policymaker awareness of predictions could spur OSB/iGaming legalization; IL surcharge approach dependent on tax treatment .	Mixed
Capital allocation	Q2: 6.5M shares repurchased YTD .	Buyback authorization increased to $2.0B; 9.3M shares repurchased to date; plan to be active near-term .	More shareholder returns

Management Commentary

“This is the most bullish I have ever felt about our future… underlying growth in the business is accelerating… [and] DraftKings Predictions… is a significant incremental opportunity.” — Jason Robins, CEO .
“In the last two months, [customer-friendly] outcomes impacted our revenue by more than $300 million, with just a handful of NFL games having an outsized effect.” — Jason Robins .
“With handle growth accelerating and parlay handle mix continuing to increase, we are excited about the trajectory of our Free Cash Flow… [and] authorized an increase in our share repurchase program from $1.0 billion to $2.0 billion.” — Alan Ellingson, CFO .
On predictions strategy: “We will pursue this opportunity, we will compete, and we will win… focus on [states] where we do not offer sportsbooks… with shorter payback periods.” — Jason Robins .
On ESPN/NBCU: “New exclusive marketing agreements… provide deeper brand affinity and broader reach, including unmatched NBA access.” — Jason Robins .

Q&A Highlights

Hold variability and modeling: Management reiterated long‑term normalization; concentrated events (NFL, Super Bowl, March Madness) can create quarterly swings; risk is managed via liability caps and hedging if needed .
Predictions market profitability: DKNG will use conservative LTV assumptions, shorter paybacks than OSB/iGaming, and leverage existing national media presence to limit incremental spend; initial focus on non‑OSB states .
Pricing and customer value vs predictions: DKNG argued OSB offers superior value via promos and single‑maker economics vs exchange fees/spreads in predictions; expects OSB to remain more attractive on net .
Taxes and pass‑throughs: IL per‑wager surcharge approach hinges on tax treatment; could instead incorporate into pricing; learnings will inform other high‑tax states .
Missouri launch and CAC: Profile expected to resemble prior successful launches; timing within NFL season should aid CAC and acceleration .

Estimates Context

Q3 revenue missed S&P Global consensus by ~4.8% ($1,144.0M vs $1,201.9M*), driven by >$300M unfavorable outcomes late in the quarter . Values retrieved from S&P Global.
Normalized/Adjusted EPS was roughly in line (−$0.26 vs −$0.2553*), while GAAP EPS missed (−$0.52 vs −$0.4122*) due to the same outcome variance and lower sportsbook net revenue margin (5.2%) . Values retrieved from S&P Global.
Given the guidance reset and inclusion of Predictions spend, Street models likely move down on FY25 revenue/EBITDA and recalibrate quarterly hold/outcome assumptions.

Key Takeaways for Investors

Near-term volatility vs long-term thesis: Q3 miss was outcome-driven; underlying drivers (parlay mix, iGaming, handle growth) are intact and accelerating (October handle +17%) .
Guidance reset de-risks FY25: Revenue/EBITDA guidance lowered and now includes Missouri and Predictions; watch Q4 outcome cadence and initial Predictions ramp to gauge FY trajectory .
Mix tailwinds support structural margin: Parlay mix and live betting leadership should expand sportsbook net revenue margin over time, albeit with quarter-to-quarter variability .
Predictions optionality: Railbird acquisition + DKNG distribution creates a credible entry in federally regulated event contracts with conservative paybacks; focus on non‑OSB states could open new TAM and pressure regulators toward OSB/iGaming legalization .
Capital returns: Repurchase authorization increased to $2.0B; management intends to buy actively as FCF improves—supportive for shares on weakness .
Watch items for Q4/Q1: NFL outcomes normalization, Missouri launch performance/CAC, Spanish‑language app roll‑out, IL surcharge impact on behavior/pricing, ESPN/NBCU activations .
Stock reaction catalysts: Guidance cut and outcome‑driven miss are negatives; buyback expansion, strong underlying KPIs, and Predictions launch updates are potential offsets near-term .

DraftKings Inc. (DKNG)·Q3 2025 Earnings Summary