Shares of DraftKings tumbled sharply after the sports betting operator issued fiscal 2026 revenue and earnings guidance that fell well short of Wall Street expectations, overshadowing record quarterly results and renewed optimism around prediction markets.

The stock dropped 18% in after-hours trading following the company’s earnings call, falling to around $20 per share — its lowest level since May 2023. By early Friday afternoon, shares were trading at $21.78, down roughly 13% from the previous close. The decline extends a broader slide that has seen DraftKings lose about 26% since the start of the year. Shares of Flutter Entertainment, parent of rival FanDuel, have fallen approximately 36% year-to-date.

Cautious 2026 outlook

For fiscal 2026, DraftKings projected revenue between $6.5 billion and $6.9 billion. The midpoint of $6.7 billion sits about 8% below consensus estimates of $7.3 billion, with even the lowest analyst projections exceeding the high end of the company’s range. The conservative outlook also extends to adjusted EBITDA, though the company did not detail a significant contribution from its newly launched prediction markets segment in its formal 2026 guidance.

The tempered forecast comes despite strong fourth-quarter performance. DraftKings reported record quarterly revenue of $1.9 billion, up 43% year over year, and set a new high for adjusted EBITDA. For the full year, revenue reached $6.1 billion, surpassing the $6 billion threshold for the first time but falling short of the company’s prior internal target range of $6.3 billion to $6.6 billion. Adjusted EBITDA also missed the low end of its previous outlook by more than $250 million.

Chief executive Jason Robins acknowledged frustration with last year’s missed targets, telling analysts the company is reassessing its approach to annual guidance to avoid overpromising. “Missing those targets again is unacceptable,” Robins said, signaling a more conservative stance for 2026.

The guidance comes at a pivotal moment for DraftKings’ business model. The company recently launched “DraftKings Predictions,” entering the fast-emerging market for sports-related event contracts. Robins has described prediction markets as the most significant growth opportunity for the industry since the 2018 repeal of the Professional and Amateur Sports Protection Act (PASPA), a Supreme Court decision that paved the way for legalized sports betting across much of the United States. Robins has projected that prediction markets could represent a $10 billion annual gross revenue opportunity nationwide, and he has positioned DraftKings to compete aggressively in the space.

The launch coincided with its first Super Bowl offering prediction contracts. On Super Bowl Sunday, DraftKings Predictions ranked second in app downloads within its category but trailed market leader Kalshi. The company nevertheless reported a threefold increase in daily trading volume, which executives cited as evidence of strong early traction.

Robins sought to reassure investors that prediction markets are not cannibalizing the company’s core online sportsbook (OSB) business. In a letter to shareholders and during the earnings call, he said January data — both internal and third-party — showed only a slight impact on betting handle, primarily affecting lower-margin customers.

Still, in its annual Form 10-K filing with the U.S. Securities and Exchange Commission, DraftKings acknowledged cannibalization as a risk factor, noting that new product offerings could divert user spending from existing products in ways that negatively affect the business.

Slowing growth and analyst concerns

Analysts remain cautious. Industry-wide January handle trends were mixed, with most operators reporting declines. DraftKings posted a 4% year-over-year increase in handle for the month, but that figure marked a sharp deceleration from 11% growth in January 2025, according to Citizens analyst Jordan Bender. JP Morgan analyst Dan Politzer pressed management on the company’s “building blocks” for sports growth, citing implied revenue deceleration in the new guidance.

Questions also linger over investment levels in prediction markets. Chief financial officer Alan Ellingson said the company plans to invest meaningfully in the category to acquire customers efficiently, but no explicit spending figure was included in 2026 guidance. Some competitors are reportedly planning to allocate between $200 million and $300 million this year toward similar initiatives.

Robins said it is too early to commit to a firm investment number. Gustavo Pifano, a portfolio manager at Gabelli Funds, suggested that an annual $100 million investment in prediction markets would not be excessive.

 

Consequently, the impact to our revenue has been de minimis.

Regulatory tailwinds

DraftKings’ optimism around prediction markets has been buoyed by recent policy developments at the federal level. Last month, Commodity Futures Trading Commission Chair Michael Selig outlined plans to establish clearer guidelines for sports event contracts, a move widely interpreted as supportive of further growth in the sector. Even so, investors appear unconvinced that the new asset class can offset moderating sportsbook growth in the near term. The market reaction suggests concerns that prediction markets could dilute core betting activity or require significant upfront investment before delivering meaningful returns.

With shares now trading well below last February’s post-earnings high of $53.49 — when the stock surged roughly 10% after a bullish call — DraftKings faces a critical year. Its ability to balance disciplined forecasting, sustained sportsbook growth and strategic expansion into prediction markets may determine whether the recent sell-off proves temporary or signals a more fundamental reassessment of its growth trajectory.