DKNG — The cost of Predictions

DraftKings is asking investors to wait for a new business to earn its keep.

On November 5, $DKNG reported third-quarter revenue of $1.33 billion, up 16% year over year, and lowered its 2026 outlook. The company now expects $175 million to $275 million in adjusted EBITDA, a profit measure that excludes items such as interest, taxes and certain other costs. Its previous range was $700 million to $900 million.

Management plans to increase its adjusted EBITDA investment in Predictions to $650 million to $700 million this year. Predictions lets customers trade event contracts. Management said promotions would offset most gross revenue from the product this year, leaving its 2026 revenue immaterial.

The spending may buy a valuable customer base, but that payoff is a forecast, not an established result. The core business outlook fell too, reflecting additional iGaming investment and sports outcomes favorable to customers, according to management.

The next test is whether Predictions revenue materializes as promotional spending eases. Track that revenue, the size of the product's adjusted EBITDA investment and core business profit against management's 2027 outlook. A growing user base matters most if it eventually produces durable economics.