TenQ

The DraftKings story

DraftKings runs online sports betting and casino games, with expansion into Predictions testing whether its core gaming business can fund another round of customer acquisition without weakening profitability.

Written from DraftKings's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $21.16share price, last close
  • $10.5Bmarket value
  • 15/36TenQ Score checks passed
  • 13.2%growth a year the price assumes

The story in brief

  • More activity, less revenue. In the quarter to June 2026, Sports Consumer Volume rose 15% to $13.1 billion, but revenue fell 5% to $1,443 million as sports outcomes and promotions reduced revenue per payer.
  • Predictions adds spending. Management maintained fiscal year 2026 Adjusted EBITDA guidance of $700 million to $900 million while expecting approximately $1 billion from the core business to help fund Predictions.
  • Cash despite losses. Over the last twelve months, DraftKings generated $651 million of free cash flow while recording a -2.9% operating margin and $324 million of stock-based pay.

What drives the business

  • Sportsbook and iGaming accounted for 93% of revenue in fiscal year 2025, with DraftKings earning the difference between customer wagers and payouts, reduced by incentives and promotions.
  • Its expansion model relies on heavy customer acquisition spending when entering jurisdictions, followed by retention and use across products, while marketing fell to 22% of revenue in the quarter to June 2026 from 29% in the quarter to March 2024.
  • DraftKings is ESPN's official sportsbook and odds provider, and its relationships with ESPN, NBC and Amazon support brand awareness and customer engagement.
  • Predictions launched in December 2025 and earns introducing fees when customers trade event contracts, adding a different revenue model alongside gaming through a Super App that was nationwide by the August 2026 earnings release.
  • In the quarter to June 2026, Monthly Unique Payers increased approximately 9% to 3.6 million, but average revenue per payer decreased 13% to $132.

What the price assumes

At $21.16, the reverse DCF implies free cash flow after stock pay grows 13.2% a year for ten years, using a 10.2% discount rate.

DraftKings delivered 132.5% growth in that measure over the last twelve months, while the TenQ check sets a 68.2% bar by slowing that record halfway toward 4%.

The implied growth rate is below that bar, although the comparison rests on a short cash growth record alongside continuing accounting losses.

Value DKNG on your own assumptions

What could change the story

  • Customer winnings and promotional spending can offset higher activity, as Sports Net Revenue Margin fell to 6.8% in the quarter to June 2026 from 8.7% in the prior year period.
  • Revenue growth over the last twelve months was 15.0%, below the 39.3% annual pace over the last three years, while the negative operating margin leaves profitability dependent on better monetization and spending control.
  • TenQ's financial health checks flag limited near-term liquidity and earnings that do not cover interest, despite positive free cash flow.
  • In August 2026, DraftKings closed a $700 million secured term loan intended partly for repurchases of convertible notes due 2028 and a $750 million revolving facility, making the use of proceeds and resulting debt obligations important to the balance sheet.
  • Lawsuits challenging federal jurisdiction over sports event contracts could restrict Predictions offerings, while gaming licenses, taxes and regulatory compliance remain conditions of operating the core business.

What to watch next

  • The next releases will test the maintained fiscal year 2026 revenue guidance of $6.5 billion to $6.9 billion and Adjusted EBITDA guidance of $700 million to $900 million.
  • Core business earnings and Predictions spending will show whether management's approximately $1 billion core Adjusted EBITDA expectation can support expansion within the consolidated guidance.
  • Sports Net Revenue Margin, average revenue per payer and promotional spending will show whether customer growth is translating into revenue, while free cash flow and stock-based pay will track the cash measure used in the reverse DCF.

Sources

Back to the DKNG report