Fantasy sports and betting company DraftKings (NASDAQ:DKNG) announced better-than-expected revenue in Q2 CY2025, with sales up 36.9% year on year to $1.51 billion. The company expects the full year’s revenue to be around $6.3 billion, close to analysts’ estimates. Its non-GAAP profit of $0.38 per share was 6.3% below analysts’ consensus estimates.
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DraftKings (DKNG) Q2 CY2025 Highlights:
- Revenue: $1.51 billion vs analyst estimates of $1.43 billion (36.9% year-on-year growth, 5.9% beat)
- Adjusted EPS: $0.38 vs analyst expectations of $0.41 (6.3% miss)
- Adjusted EBITDA: $300.6 million vs analyst estimates of $243.6 million (19.9% margin, 23.4% beat)
- The company reconfirmed its revenue guidance for the full year of $6.3 billion at the midpoint
- EBITDA guidance for the full year is $850 million at the midpoint, above analyst estimates of $840.8 million
- Operating Margin: 10%, up from -2.9% in the same quarter last year
- Monthly Unique Payers: 3.3 million, up 200,000 year on year
- Market Capitalization: $21.29 billion
StockStory’s Take
DraftKings’ second-quarter results showed strong top-line momentum, with revenue surpassing Wall Street’s expectations and notable margin expansion. Management attributed this performance primarily to product enhancements in the Sportsbook segment, improved cost discipline, and favorable Sportsbook betting outcomes. CEO Jason Robins highlighted that “revenue growth accelerated to 37% year-over-year,” and noted that improved promotional efficiency and a higher Sportsbook hold percentage were significant contributors to the company’s adjusted EBITDA growth.
Looking forward, DraftKings’ guidance is underpinned by anticipated growth in live betting, ongoing cost optimization, and a new state launch for mobile Sportsbook. Management expects continued benefits from AI-driven efficiencies and remains focused on disciplined capital allocation. CFO Alan Ellingson emphasized that “our higher annual revenue positions us to absorb our anticipated mobile Sportsbook launch in Missouri,” while also acknowledging that higher state taxes are factored into the outlook. The company is also closely monitoring regulatory changes and emerging opportunities in federally regulated prediction markets.
Key Insights from Management’s Remarks
Management pointed to operational efficiency, product leadership in live betting, and successful customer engagement as major drivers of the quarter, while discussing strategies for cost control and market expansion.
- Live betting product leadership: DraftKings extended its lead in live betting, with handle up 16% year-over-year and over 90% uptime in core markets, supported by the integration of Simplebet technology. Management views this as a foundation for future customer engagement and acquisition.
- Sportsbook margin expansion: Higher structural hold rates and improved parlay mix drove net revenue margins to a record 8.7%. Promotional reinvestment as a percentage of gross gaming revenue improved by nearly 600 basis points, reflecting more effective promotional spend and Sportsbook-friendly outcomes.
- AI and technology investments: The company is deploying artificial intelligence and other technologies to optimize both costs and product experience. Robins noted that AI is starting to yield benefits in automating workflows and expects further top-line impact, particularly in trading and personalization, over the next 6 to 12 months.
- Cost discipline and efficiency: DraftKings continues to leverage scale and brand strength for efficient customer acquisition, with marketing and operating expenses in line with expectations. Management identified opportunities to further streamline costs through renegotiation of state access and data rights fees and ongoing optimization of payment systems.
- iGaming engagement and cross-sell: iGaming revenue grew 23% year-over-year, driven by higher engagement and increased jackpots. Management believes that the largest opportunity remains with “slots-first” customers, a segment where DraftKings is focused on expanding its brand beyond its core sports audience.
Drivers of Future Performance
DraftKings’ outlook is shaped by its focus on live betting, cost optimization, and new market expansion, while navigating regulatory and tax headwinds.
- Live betting and product innovation: Management expects live betting to remain the primary driver of handle and revenue growth, particularly with the first NFL season fully integrating Simplebet technology. Enhanced personalization and broader market offerings are projected to deepen customer engagement and extend the acquisition window.
- Cost containment amid tax changes: The company is actively working to offset higher state taxes, especially in Illinois and New Jersey, through renegotiation of market access agreements, technology-driven cost reductions, and potential adjustments to pricing and promotional strategies. Management sees further upside from optimizing payment systems and leveraging AI for expense management.
- Expansion and regulatory monitoring: The launch of mobile Sportsbook in Missouri is planned for later this year, with expectations for accelerated customer acquisition given the timing during the NFL season. Additionally, DraftKings is monitoring prediction market opportunities and potential changes in regulatory environments, which could present new avenues for growth or require strategic adjustments.
Catalysts in Upcoming Quarters
In the coming quarters, our team will track (1) the pace and profitability of DraftKings’ Missouri Sportsbook launch, (2) continued growth in live betting engagement and its impact on overall handle, and (3) the company’s success in offsetting new state tax headwinds through cost discipline and renegotiated agreements. Progress on AI-driven cost optimization and regulatory developments in prediction markets will be additional areas of focus.
DraftKings currently trades at $42.86, down from $45.38 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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