DraftKings saw its third-quarter revenues spike 39%, but a few rough weeks in the NFL season forced the sports betting giant to lower its 2024 fiscal year guidance.
Sportsbooks have experienced a particularly rough patch when it comes to the NFL, the sports league most wagered on in the U.S. DraftKings said “customer-friendly sport outcomes” early in the fourth quarter—bettors’ winnings, in other words—forced the company to cut its profit estimate. Truist Securities analyst Barry Jonas called it “the worst stretch” DraftKings had ever had in terms of the percentage of dollars retained from NFL bets.
“Just last night, if the Bengals made that two-point conversion or if they didn’t score that last touchdown, there would have been very different [betting] outcomes,” DraftKings CEO and cofounder Jason Robins said in a conference call with analysts Friday. “So, things can swing either way. Over a longer period of time, it normalizes.”
Favored by around six points, the Ravens’ 35–34 victory meant they didn’t cover the spread against the Bengals on Thursday night. Robins said that favorites winning or big-name players scoring touchdowns in player prop bets are usually good for the customer.
“When you’re seeing the backup tight ends and running backs get into the end zone and low-scoring games where the underdogs are winning, that’s good for the house,” Robins said.
DraftKings reported revenues of $1.095 billion that were about in line with analysts’ expectations, but posted a higher-than-forecast net loss for the quarter. Shares (DKNG) dipped about 6% in premarket trading, but rebounded once markets opened Friday.
The company lowered its full-year 2024 revenue guidance to a range between $4.85 billion and $4.95 billion from $5.05 billion to $5.25 billion.
The Boston-based company was rosier about its 2025 outlook, forecasting revenue to be $6.2 billion to $6.6 billion, or about 31% higher year over year. It also said the company’s measure of monthly unique paying customers rose to 3.6 million in the third quarter, an increase of 55% compared to the third quarter of 2023.
In August, DraftKings reported its first profitable quarter since it became a publicly traded company in April 2020. A loss this quarter was anticipated, and the downward adjustment to its fiscal 2024 guidance wasn’t shocking either given the recent run by NFL bettors.
DraftKings and FanDuel have captured about 70% of the gross gaming revenue in the U.S., according to Eilers & Krejcik Gaming. From June through August this year, FanDuel secured an estimated 38.1% of gross gaming revenue, while DraftKings captured 31%, per Eilers & Krejcik Gaming’s latest monthly report.
Now the two behemoths and the other online sports betting companies are preparing to enter Missouri after voters on Tuesday approved a sports betting ballot measure. Missouri will be the 39th state to approve state-sanctioned sports betting since 2018’s U.S. Supreme Court decision that opened up such betting nationwide.
“I do think Missouri legalizing sports betting by a hair is a positive since it’s another state coming online,” Jonas told Front Office Sports. ”But typically when a new state opens, there’s an investment phase with negative earnings and maybe even negative revenue for the first year or so out of the gate with all the sign-up promotions.”
The third quarter got off to a shaky start for DraftKings, at least from a PR standpoint.
DraftKings announced after its last earnings report that it would institute a fee of between 3% and 5% on winnings in states where DraftKings pays a tax rate of more than 20%, a list that includes Illinois, New York, and Pennsylvania. Later in August, Flutter (FanDuel’s parent company) said it would not follow DraftKings’ lead to charge a fee to winning bettors, a move that led DraftKings to back off its fee plan.
“We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge,” DraftKings tweeted Aug. 13.
Crypto-based prediction markets grew in prominence during the recent election cycle. Polymarket, one of prediction market leaders, has offered sports wagers for some time and is expected to try to make further inroads into sports betting in the not-so-distant future.
Meanwhile, Robins said DraftKings is “looking at” getting into the election market.
“I think it’s a very interesting thing,” Robins said. “I know there’s been a lot of attention on it over the last few weeks. I do think there could be a place for it outside of elections, but that’s really where the interest seems to be now from a customer demand side. It is definitely something we’re looking at in advance of the next presidential election and potentially it’ll be an opportunity to look at something sooner.”
