DraftKings saw its stock price slide by more than 16% in after hours trading on Thursday after missing analyst estimates in its fourth-quarter earnings report.
The decrease in stocks also comes off the back of establishing a prediction-market footprint through a new partnership with Crypto.com.
Earnings well short of fourth-quarter expectations
For the quarter ended in December, DraftKings reported revenue of about $2 billion, roughly in line with analyst estimates of $1.99 billion. However, earnings per share came in at $0.25, well below consensus forecasts of $0.41. The company also issued initial 2026 revenue guidance of between $6.5 billion and $6.9 billion.
The selloff adds to a difficult 12 months for the Boston-based operator, whose shares closed Thursday at $25.16, down roughly 45% over the past year.
Higher promotional spending, customer acquisition costs, and state-level tax increases in key markets likely weighed on margins during the quarter. In particular, intensified competition in mature states such as New York and New Jersey, where tax rates are already among the highest in the U.S., continues to pressure profitability even as handle grows.
Some analysts also point to the rise of federally regulated prediction platforms such as Kalshi as an added layer of uncertainty for traditional sportsbooks like DraftKings.
While event-contract trading remains a small slice of the overall wagering market, investors are increasingly wary that alternative models operating under different regulatory and tax frameworks could intensify competition over time.
Even if the immediate financial impact is limited, the emergence of new betting-adjacent platforms contributes to larger sector concerns about long-term margin pressure and growth sustainability.
Crypto.com partnership to expand reach of DraftKings
The agreement introduces player-specific contracts for the NFL and NBA, the first player-based offerings on the platform, made available within a CFTC-regulated framework.
Jeanine Hightower-Sellitto, Senior Vice President and General Manager of DraftKings Predictions, said the collaboration builds momentum for the product by integrating additional regulated exchanges and broadening customer access to sports-related contracts.
In addition to NFL and NBA player markets, DraftKings Predictions offers contracts tied to soccer, MMA, golf, boxing, tennis and the Olympic Games, alongside financial markets provided through CME Group.
Crypto.com said the partnership will also support the rollout of additional categories beyond sports, including politics, culture and entertainment. DraftKings added that it plans to integrate Railbird Exchange in the coming months. The product is currently available to eligible customers in states including California, Florida, Georgia and Texas.
DraftKings CEO Jason Robins puts focus on prediction markets
In a letter to shareholders on Thursday, Roberts outlined his belief in the potential of their new partnership with crypto.com.
Referring to it as an additional revenue engine, he wrote: “Predictions is rapidly developing into a massive, incremental opportunity, and we are moving with urgency,
“We expect to emerge as the leader in this nascent category… We are targeting hundreds of millions in annual revenue for DraftKings Predictions in the years ahead, and we believe there is much more upside over the long-term.”
Chief Financial Officer Alan Ellingson remained bullish on the company’s medium-to-long term prospects. In his letter to shareholders, he said: “The first quarter of 2025 is off to a strong start and that provides us incremental confidence in our fiscal year 2025 revenue and Adjusted EBITDA guidance ranges,
“In January, our core value drivers resulted in revenue and Adjusted EBITDA exceeding our expectations for the month with an actual sportsbook hold percentage that was 11%. Month-to-date through February 11, our acquisition, retention and engagement continue to be strong and our actual sportsbook hold percentage was 13%.”
Robins’ comments underscore how seriously major operators are beginning to treat prediction markets, not as a side experiment, but as a potential pillar of future growth. With traditional sportsbook margins closely watched by investors and regulators alike, the push into event-based trading could represent the next competitive battleground for U.S. gaming companies.
Marketing spend under close observation
Marketing expenditure remains a key focal point for investors assessing DraftKings’ path to sustained profitability. In the December quarter, the company recorded $442.6 million in sales and marketing expenses, marking a roughly 20% increase from $368.6 million in the same period of 2024 and a sharp 52% rise compared with $290.7 million in the fourth quarter of 2023.
The steady escalation highlights the competitive intensity of the U.S. online betting market, where operators continue to rely on promotional incentives, advertising campaigns, and customer acquisition bonuses to defend market share.
While higher spending can drive user growth and engagement, it also raises questions about margin discipline, particularly at a time when investors are prioritizing earnings expansion over top-line growth. With fewer new states launching legal betting and competition entrenched in mature markets, analysts are increasingly scrutinizing whether elevated marketing costs will translate into durable customer lifetime value or simply compress profitability further.
