DraftKings Q3 2026 Earnings: Revenue Growth Came with Wider Losses

DraftKings (NASDAQ: DKNG) reported Q3 2026 revenue of $1.329 billion, up 16.2% from $1.144 billion a year earlier, while diluted loss per share widened to $0.94 from $0.52. Sports revenue and a higher net revenue margin drove the top line, but sales and marketing expense rose by $245.3 million to $605.7 million, contributing to wider GAAP and adjusted losses.

Core Earnings Data

Revenue growth did not translate into improved earnings. DraftKings’ operating loss widened by $221.2 million, while its net loss increased by $211.9 million from the prior-year quarter.

Non-GAAP results showed the same direction: adjusted EBITDA fell to a $316.9 million loss, and adjusted loss per share more than doubled to $0.53.

Adjusted EPS and adjusted EBITDA are non-GAAP measures used by DraftKings to evaluate operating performance after excluding specified non-cash, non-operating, and non-recurring items.

Business and Segment Performance

Sports was the principal growth engine. Sports revenue increased by $187.5 million, slightly more than the company’s total revenue increase, as slower iGaming growth and lower other revenue offset part of the gain.

Sports consumer volume rose 21.9% to $13.90 billion, while the sports net revenue margin improved to 5.6% from 5.2%. DraftKings defines sports revenue and consumer volume to include prediction markets alongside its online and retail sportsbooks, so the disclosed figures do not isolate Predictions’ quarterly contribution.

Monthly unique payers increased approximately 13% to 4.1 million. Average revenue per monthly unique payer rose 3% to $109, primarily because of the improved Sportsbook net revenue margin. Management also said more than 1.6 million customers had engaged with Predictions year to date.

Gross Margin Improved, but Marketing Spend Deepened Losses

Cost of revenue increased 14.8%, slower than revenue. Based on the reported figures, gross profit was approximately $429.1 million, up from $359.9 million, while gross margin improved to about 32.3% from 31.5%.

That improvement was overwhelmed by operating expenses. Sales and marketing increased 68.1% to $605.7 million, product and technology expense rose 19.8% to $137.4 million, and general and administrative expense increased 14.3% to $179.1 million. Sales and marketing alone exceeded quarterly gross profit by approximately $176.6 million.

Management connected the company’s updated full-year adjusted EBITDA outlook primarily to increased investment in Predictions. However, the release did not quantify Predictions’ specific contribution to Q3 revenue or expenses, preventing a precise separation of the new offering from the core business.

Cash Flow and Balance Sheet

The supplied cash flow statement covers the first nine months of 2026 rather than Q3 alone. Nine-month operating cash flow remained positive at $63.0 million but declined from $342.4 million in the comparable 2025 period, alongside a wider year-to-date net loss.

DraftKings used $177.4 million in investing activities during the nine months, including $55.4 million for property and equipment and $113.5 million for internally developed software. Cash and cash equivalents stood at $1.101 billion on September 30, compared with $1.128 billion at the end of 2025.

The financing mix also changed. DraftKings repurchased $300.4 million of convertible notes and received $687.8 million in net proceeds from Term B loans. On the balance sheet, convertible notes declined to $942.1 million from $1.259 billion at year-end, while Term B loans increased to $1.251 billion from $576.5 million. The company also spent $154.2 million on stock repurchases during the nine-month period, excluding $62.4 million of treasury stock purchased for restricted-stock-unit withholding.

Earnings Guidance

DraftKings updated its fiscal 2026 guidance and introduced fiscal 2027 guidance. The release did not provide the previous 2026 ranges, so the size of the revision cannot be determined from the supplied information.

The guidance makes the Predictions investment trade-off explicit. At the midpoints, expected 2026 core adjusted EBITDA of $900 million is reduced by approximately $675 million of Predictions investment, producing total adjusted EBITDA guidance centered at $225 million.

DraftKings expects Predictions revenue to be immaterial in 2026 because customer promotions will offset most of the gross revenue generated. For 2027, the midpoint of total revenue guidance represents 17% year-over-year growth, according to the company. At the midpoints, $1.2 billion of core adjusted EBITDA less $300 million of Predictions investment reconciles to overall adjusted EBITDA of approximately $900 million.

Recent Insider Transactions

The supplied six-month insider summary showed 1,056,340 shares purchased and 108,355 shares sold, resulting in net purchases of 947,985 shares across 31 purchase and sale transactions. Among the latest individual entries, only the following records included both a transaction description and reported value; entries with missing transaction details were omitted.

The gift and derivative conversion are distinct from open-market purchases or sales. These transactions and the aggregate net-purchase figure do not, by themselves, establish insiders’ views about DraftKings’ prospects.

Risks Investors Need to Watch

• Predictions investment and promotional intensity: DraftKings expects $650 million to $700 million of adjusted EBITDA investment in Predictions during 2026 while related revenue remains immaterial because promotions offset most gross revenue.
• Sports outcome volatility: Management said modestly customer-friendly sports outcomes affected expected core adjusted EBITDA. Changes in the net revenue margin can materially influence revenue even when customer volume rises.
• Expense growth: Sales and marketing increased much faster than revenue in Q3, causing losses to widen despite higher gross profit.
• Cash conversion and leverage: Nine-month operating cash flow declined substantially, while Term B loan balances increased. Continued investment and share repurchases add competing uses for cash.
• Uneven revenue growth: Sports drove virtually all of the quarterly revenue increase, while iGaming grew only 2.1% and other revenue declined 12.5%.

Summary

DraftKings delivered 16.2% revenue growth in Q3 2026 as sports volume, customer activity, and net revenue margin improved. The central issue was profitability: higher gross profit was more than offset by sharply increased marketing and other operating costs, widening both GAAP and adjusted losses. Investor attention now shifts to whether Predictions can produce the revenue contemplated in 2027 guidance while the core business sustains growth, cash generation, and improved expense discipline.