At DraftKings, the crown is yours.
That's an internal company slogan, of course, aimed at empowering the thousands of workers at the organization's employ.
On Q3 day, however, DraftKings may as well have pried an actual crown away from its rivals and said "yep, that's ours now, thank you."
Indeed, just as some commentators were waiting to pounce on a quiet quarter for the sports betting giant, news broke during Penn Entertainment's Q3 earnings report that ESPN Bet will shut down. ESPN itself waited a matter of minutes before then announcing it will partner with DraftKings in December.
Add this to recent news that DraftKings acquired Railbird Exchange to officially enter the prediction-market arena and you have a powerful new combination.
The chess pieces have well and truly shifted and the "King" is several steps further ahead of those in its trail - closer to market leader FanDuel, too.
The story so far
As Co-Founder and CEO Jason Robins openly discussed during our US CEO Special this year, DraftKings had an issue with profitability for years.
It was a problem I'd personally written about and it was a trend Robins has admitted he was well aware of. In past years, high growth and low profitability were an in-vogue cocktail within capital markets.
Not anymore, of course, and that's why DraftKings' profitable Q2 was a welcome reward for Robins and his employees.
Expectations have withered since, however. Over the last month, DraftKings stock is down almost 20%. Even though Robins had told us DraftKings would make its move into prediction markets soon, investors seemed to want more.
Flutter Entertainment, FanDuel's parent company, had announced a prediction-market deal with CME Group, while Kalshi, Robinhood, Underdog Sports and even Crypto.com have made significant prediction moves across the US.
Was DraftKings getting left behind? The Railbird acquisition showed that, even if it was moving slower than some competitors, DraftKings at least had a plan.
But the ESPN news may now leave anyone who doubted DraftKings regretting their own haste.
From Penn to predictions
Penn Entertainment will be kicking itself that it is DraftKings now benefiting from any early work it did with ESPN. ESPN Bet was born in August 2023 and, just over two years later, it is no more.
DraftKings made a similar play with Barstool Sports, which Penn sold for just $1 as part of its several-billion-dollar deal with ESPN. Instead of the complications of a merger, DraftKings simply partnered with Barstool, allowing it to remain the media firm it originally started out as.
But how will the market shape up now? Does DraftKings have concrete hopes of knocking FanDuel off top spot? Does ESPN have renewed hope of glory within gaming and will investors take more kindly to DraftKings shares?
Naturally, the Railbird and ESPN deals may be more connected than at face value. Especially if there is a future for ESPN in predictions.
Q3: The numbers
So how did ESPN's future sports betting partner fare during its Q3 report?
Well, it's an intriguing time to be analyzing DraftKings numbers, given revenue went up just 4% year-over-year to $1.14bn, with net loss falling 12% but still standing at the significant sum of $256.8m.
Adjusted EBITDA, too, was negative $126.4m for the quarter, with adjusted loss per share totaling $0.26. Both of these numbers went down.
And yet CEO Robins says this is the "most bullish" he has felt about the industry giant.
This is the most bullish I have ever felt about our future. Underlying growth in the business is accelerating and we are excited to launch DraftKings Predictions in the coming months, which we view as a significant incremental opportunity
CFO Alan Ellingson also emphasized that handle growth is speeding up and parlay handle mix is continuing to increase.
But, with a 4% revenue rise as small a growth percentage as one can remember for DraftKings, we may be seeing the upper limits of where its existing products can go.
The ESPN partnership should increase market share (although ESPN Bet did not have much market share itself to start with), but the majority of DraftKings' foreseeable growth should come from prediction markets.
Robins' letter to shareholders
For the 2025 fiscal year, DraftKings' revenue guidance is now $5.9bn to $6.1bn (which would represent annual growth of 24-28%). Adjusted EBITDA guidance, too, is within the region of $450m-550m.
In his letter to shareholders, Robins admitted his bullishness may even sound "surprising" given these revisions.
But his confidence touched on DraftKings' agreement with NBCUniversal, a superior NBA product, a soon-to-launch Spanish language functionality for the (soccer) World Cup in 2026 and - naturally - ESPN and predictions.
There is certainly an element of risk behind DraftKings' ESPN partnership - Penn's gamble on the same brand was far more aggressive and, ultimately, nowhere near as fruitful as the size of its wager required.
But, anticipating only a marginal Q3 revenue rise, and a fall in adjusted EBITDA, DraftKings knew it needed to send a statement of intent. It chose the biggest sports broadcaster in America to do it with.
Ending his letter to shareholders, Robins highlighted three key takeaway points on predictions:
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DraftKings will be measured (i.e not gung ho) in its prediction investment efforts
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DraftKings will focus on states where it does not currently offer sportsbook (reducing potential cannibalization)
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DraftKings will "compete, and we will win"
Bullish, indeed.
For the nine months ended September 30, DraftKings' revenue is up 20% year-over-year to $4.06bn, while adjusted EBITDA has tripled to $276.8m. Net loss is almost three times better, too, but still stands at $132.7m
