DraftKings Q2 2026 earnings: Sports monetization pressure leads to a GAAP loss

DraftKings (Nasdaq: DKNG) reported Q2 2026 revenue of $1.443 billion for the quarter ended June 30, down 4.6% from $1.513 billion, while GAAP diluted EPS shifted to a loss of $0.14 from earnings of $0.30 a year earlier. Adjusted EBITDA fell to $114.6 million from $300.6 million as weaker sports monetization and higher spending outweighed growth in customer activity and iGaming.

Core earnings data

Revenue declined primarily because customer-friendly sports outcomes reduced the amount DraftKings retained from customer activity, while promotional reinvestment increased following customer acquisition for its Sportsbook and Predictions offerings. Cost of revenue and sales and marketing expenses also increased despite the lower revenue base.

The result was a contraction in gross profit and a swing from GAAP operating and net profits to losses. Non-GAAP profitability remained positive but declined substantially year over year.

Gross profit and margin are approximate calculations based on reported revenue and cost of revenue. Adjusted diluted EPS and Adjusted EBITDA are non-GAAP measures.

Higher sports volume did not translate into higher sports revenue

Sports Consumer Volume increased 14.5% to $13.14 billion, reflecting stronger customer acquisition and engagement. However, Sports Revenue declined 10.6% to $891.9 million because Sports Net Revenue Margin fell to 6.8% from 8.7%.

That divergence was the central issue in the quarter: customers wagered or traded more, but customer-friendly outcomes reduced DraftKings’ retained revenue. Promotions for new Sportsbook and Predictions customers added further pressure. Predictions, which launched in December 2025, contributed to both customer growth and promotional reinvestment.

Monthly Unique Payers increased approximately 9% to 3.6 million, but Average Revenue per MUP decreased 13%, or $19, to $132. This shows that user growth was not enough to offset weaker revenue generated per payer.

iGaming provided a partial counterweight. Its revenue rose 7.5% to $461.9 million, while Other Revenue increased 5.2% to $89.4 million. Together, those gains offset part—but not all—of the $106.0 million decline in Sports Revenue.

Profitability, cash flow, and the balance sheet

Cost of revenue increased to $891.8 million from $854.6 million even as revenue declined. Sales and marketing expense rose about 38% to $322.5 million, while product and technology expense increased to $127.6 million from $108.4 million. These changes contributed to the swing from $150.6 million of operating income to a $68.2 million operating loss.

DraftKings still reported positive Adjusted EBITDA because its non-GAAP calculation excludes several expenses included in GAAP results. The Q2 reconciliation included $80.3 million of depreciation and amortization, $82.6 million of stock-based compensation, and $19.9 million of advocacy and related legal expenses among the adjustments.

Cash flow figures were provided for the six months ended June 30 rather than Q2 alone. Year-to-date operating cash flow increased to $63.0 million from $54.9 million. Investing outflow widened to $93.4 million, including $75.1 million spent on internally developed software, while financing activities used $186.6 million. Financing outflows included $154.2 million of share repurchases and $43.5 million of treasury-stock purchases for restricted stock unit withholding.

Cash and cash equivalents stood at $983.9 million on June 30, down from $1.128 billion at the end of 2025. The balance sheet also included $1.260 billion of convertible notes and a $574.6 million Term B Loan, both reported net of issuance costs.

FY2026 guidance

DraftKings maintained the full-year ranges previously announced on May 7, 2026. The unchanged outlook indicates that management did not alter its annual financial framework following the Q2 revenue and profitability decline.

CFO Alan Ellingson said the core business remains on track to generate approximately $1 billion of Adjusted EBITDA in 2026, providing financial flexibility to invest in the Predictions opportunity. That core-business figure is separate from the company-wide Adjusted EBITDA guidance shown above.

Management’s view

CEO Jason Robins emphasized growth in handle, users, and engagement despite the reported revenue decline. He also said the company’s Super App is available nationwide and that Predictions is growing faster than management initially anticipated. Management’s confidence in Predictions is based on customer metrics it views as similar to Sportsbook metrics, its customer lifetime-value position, and its product development strategy.

Recent insider transactions

The supplied six-month insider snapshot showed 2,437,587 shares categorized as purchases and 594,314 as sales, for net purchases of 1,843,273 shares. It also listed total insider holdings of 14.56 million shares and net shares purchased equal to 14.5% of insider holdings; these categories may include transactions other than open-market trades.

Only three of the supplied recent entries contained a clear transaction type and reported value. They are presented without drawing conclusions about insiders’ views of the company.

Risks investors should monitor

• Sports outcome volatility: Q2 demonstrated that higher customer volume does not necessarily produce higher revenue. Another period of customer-friendly outcomes could continue to pressure Sports Net Revenue Margin and profitability.
• Promotional intensity: New-customer promotions helped increase payers but contributed to a 13% decline in revenue per payer and a sharp increase in sales and marketing expense.
• Predictions investment: Management sees Predictions as a significant opportunity, but additional spending could limit how quickly core-business earnings translate into consolidated Adjusted EBITDA and cash generation.
• Legalization and advocacy costs: DraftKings recorded $19.9 million of advocacy and related legal expenses in Q2, primarily connected with efforts to legalize or support its offerings in additional states.
• Cash demands from investment and capital returns: Positive year-to-date operating cash flow was more than offset by investing and financing outflows, while cash and cash equivalents declined from year-end.

Summary

DraftKings expanded customer activity in Q2 2026, but sports outcomes and promotional reinvestment reduced sports monetization, pushing revenue lower and turning the prior-year GAAP profit into a loss. iGaming growth and positive Adjusted EBITDA provided some support, while management kept its FY2026 guidance unchanged. The main issues to watch are whether Sports Net Revenue Margin normalizes, whether revenue per payer improves, and how much investment Predictions requires during the second half of the year.