DraftKings Tops Q3 Numbers Despite Volatility

BOSTON — DraftKings beat profit expectations in the first quarter of 2025, even as it faced another round of unfavorable sports results that weighed on revenue. The operator posted a 20% year-over-year revenue increase to $1.41 billion for the quarter ending March 31, missing Wall Street’s consensus of $1.45 billion but still delivering stronger-than-expected profitability.

Adjusted EBITDA came in at $102.6 million, beating analysts’ forecast of $98.9 million. Earnings per share landed at $0.12, matching estimates.

A key drag on revenue was the NCAA men’s basketball tournament, where top seeds won at a historic rate. According to DraftKings, favorites won 82% of the time during March Madness — the highest rate on record. The skewed outcomes, where bettors heavily backed favorites, cost the company $170 million in revenue and $111 million in adjusted EBITDA.

This marked the second straight quarter in which favorites dominated major sporting events. Similar trends appeared at the end of the 2024 NFL season. Despite this, DraftKings executives framed the volatility as a statistical outlier rather than a systemic issue.

“Our analyses provide us strong confidence that the recent volatility we’ve experienced is random in nature,” CEO Jason Robins said on the company’s earnings call.

NIL’s Growing Influence

Robins also pointed to broader changes in college sports as a possible contributor to the dominance of higher-seeded teams. Name, Image and Likeness (NIL) deals are drawing top athletes to powerhouse programs. That could tilt March Madness further in favor of traditional favorites in future years, potentially reshaping the betting landscape.

Still, Robins emphasized that bettors tend to favor higher-ranked teams regardless of broader trends, a behavior deeply ingrained in the market. DraftKings’ structural hold — the theoretical margin sportsbooks expect — was 10.4%, while its actual hold was 9.5%. These metrics suggest that despite the outcomes, the company’s pricing and risk management models are functioning within expected parameters.

The company is increasingly leaning on AI to refine those systems. In a shareholder letter, Robins said DraftKings is adopting an “AI-first” approach, including using AI for pricing and risk mitigation. The integration of micro-betting platform Simplebet and acquisitions like SportsIQ and Mustard Golf are also contributing to improved in-game betting metrics, with in-play wagers now accounting for 36% of baseball betting volume.

 

Revised Guidance Amid Uncertainty

Due to the revenue drag from sports outcomes, DraftKings trimmed its full-year guidance. It now expects 2025 revenue between $6.2 billion and $6.4 billion, down from its prior range of $6.3 billion to $6.6 billion. Projected adjusted EBITDA was also lowered to a range of $800 million to $900 million, from $900 million to $1 billion. Despite the lower guidance, DraftKings executives remain upbeat about the business’ fundamentals.

 

“We believe our product, analytics, and promotional efficiency are continuing to improve,” said CFO Alan Ellingson.

 

Handle — the total amount wagered — rose 16% year-over-year to $13.9 billion in Q1. In states where DraftKings operated before 2024, handle increased 11%. DraftKings reported 4.3 million average monthly unique payers in Q1, up 28% from a year earlier. However, average revenue per user (ARPMUPs) dipped 5% to $108. Excluding the acquisition of lottery courier service Jackpocket, that figure would have risen 7%.

Jackpocket has faced challenges of its own. After halting operations in Texas and New Mexico due to regulatory changes, DraftKings said Jackpocket could break even this year, largely due to exiting the Texas market. Plans are underway to integrate the service into the DraftKings app by year-end.

Robins also noted growing interest in prediction markets — peer-to-peer betting platforms — and is monitoring legal developments closely, especially in states without legalized sports betting.

• DraftKings posted a 20% year-over-year revenue increase to $1.41 billion and beat profit expectations despite taking a $170 million revenue hit from unfavorable sports outcomes during March Madness.

• Historic wins by tournament favorites drove higher-than-expected payouts to customers, continuing a trend from late 2024 that DraftKings attributes to statistical variance, not flaws in its betting models.

• Despite the headwinds, DraftKings raised user engagement, improved in-game betting performance, and reaffirmed confidence in long-term growth through AI-powered risk management and product expansion.

 

The Reaction and the Future

In the lead-up to earnings, several analysts downgraded DraftKings stock, and BlackRock reduced its position by 25.9%, holding 23.1 million shares as of March 31.

Following the earnings release, DraftKings stock climbed nearly 2% in after-hours trading to $35.35. It peaked at $37.60 Friday morning before settling around $36.50 by mid-day.

Rough sports results may have clipped the top line, but DraftKings’ ability to hit profitability targets, maintain user growth, and adapt with AI and analytics is keeping investors engaged — for now. If outcome-driven revenue swings become a long-term trend, however, more questions about pricing models and risk exposure could surface.