DraftKings Q2 Shows Record Revenue, Eyes Prediction Markets for Future Expansion

DraftKings reported record revenues for Q2, driven by a higher betting hold, which led to a surge in profitability per player. In an effort to continue expanding its user base, the company is exploring prediction markets as a potential source of future revenue.

For the three months ending June 30, DraftKings reported:

• $1.51 billion in revenue (+37% YoY)
• $158 million in net income, up from $64 million in Q2 2024
• $301 million in Adjusted EBITDA, more than double last year’s figure

Despite posting impressive figures, the company reported a net loss of $293.7 million for the quarter. It restated its fiscal year 2025 revenue guidance of $6.2 billion to $6.4 billion, with an adjusted EBITDA guidance of $800 million to $900 million.

Shift Towards Maximizing User Profitability

A 29% increase in average revenue per monthly unique payer (ARPMUP) to $151 was a large contributor. The total number of monthly unique payers (MUPs) rose modestly, up 6% to 3.3 million, which was driven by the acquisition of the lottery app JackPocket.

DraftKings focused on “promotional reinvestment” this quarter, offering targeted promotions to higher-value customers, rather than broad promotions that target the acquisition of new users.

As a way to continue monetizing its user base, the company expressed interest in expanding into prediction markets. A letter to shareholders stated: “We continue to monitor events surrounding federally-regulated Prediction Markets and are actively exploring ways to enhance shareholder value through this opportunity.”

Alan Ellingson, DraftKings’ Chief Financial Officer, also commented: “We remain focused on investing in key growth initiatives across the organization to maximize shareholder returns over the long-term.”

The company is reportedly in talks with the prediction market platform RailBird to enter the growing prediction markets space. Railbird was recently granted a license by the Commodity Futures Trading Commission (CFTC) to offer event contracts, ahead of an expected launch in the near future.

Favorable Results Increase Sportsbook Hold

While some aspects of DraftKings’ high revenue numbers reported this quarter may be attributed to promotional strategies and cost reductions, the company also relied on favorable sporting results.

The letter to shareholders highlighted: “Sport outcomes tend to normalize over the long term but typically benefit either the sportsbook or our customers in the short term. In May and June combined, sport outcomes benefited the Company and added $110 million to our revenue.”

DraftKings leadership estimated bettor-friendly March Madness results cost them $170 million in revenue and $111 million in Adjusted EBITDA for the first quarter of the year.

A move into prediction markets could make the company less dependent on sporting results for its financial growth, as users would be gambling against other users’ predictions rather than playing against the house.

DraftKings may also be in a better position to utilize the sports betting licenses it holds across 25 states, as well as Washington D.C., to introduce sports prediction markets approved by the CFTC and state regulators.

Kalshi, on the other hand, while licensed by the CFTC, is facing mounting legal challenges by state regulators as it does not hold a sports betting license in any state. The Maryland court ruling against the company could be a sign that states will increase resistance to the platform’s expansion into sports event contracts.

Future Outlook Positive for Investors

DraftKings’ stock price jumped from $45.36 to $48 after the release of the record revenue figures. Analysts continue to favor the stock based on the maintained revenue and Adjusted EBITDA guidance, expecting results to be at the high end of the range.

However, it fell short of earnings per share again with quarterly earnings of $0.38 per share, missing the Zacks Consensus Estimate of $0.41 per share. The company is moving in the right direction with earnings per share well up from $0.12 a year ago.

Jason Robins, DraftKings’ Chief Executive Officer and Co-founder, was positive on the results, commenting: “We set records for revenue, net income and Adjusted EBITDA in the second quarter, driven by an acceleration in revenue growth to 37% year-over-year.”

“We are pleased to be maintaining our fiscal year 2025 guidance, with revenue expected to be closer to the high end of our range, highlighting the strength of our platform as we prepare for an exciting new state launch.”

To combat the growing challenges of tax increases in numerous states, the company established its own PAC this quarter, which will increase pressure on states to create favorable market conditions.

More will be revealed in DraftKings’ earnings call scheduled for Thursday, while rival sportsbook FanDuel, owned by Flutter, is set to release its Q2 earnings later in the day.