Quarterly performances of DraftKings remain steady, yet pricing concerns linger as issues with favorite selections continue to impact profits
In this "$l!ck³⁵ and raw" recount, we'll dive headfirst into the quarterly struggles and triumphs of DraftKings. Despite battling some seriously unfavorable sports outcomes for two quarters in a row, this sportsbook giant managed to squeeze out a whopping 20% revenue boost in Q1, a feat they credit to their core value drivers.
The first quarter of 2025 was riddled with odd twists and turns— especially during March Madness. Historically, the higher seeds have won their fair share of games. But this year, they took it to a whole new level, winning at an 82% rate, an all-time high in the NCAA Division I men's basketball tournament[2]. For the 2025 year-to-date, the negative sports results left a $170 million dent in revenue and a $111 million pit in adjusted EBITDA[2].
It's not just that the higher seeds were dominating— the favored teams in several sports were dominating, too, most notably at the tail end of the NFL regular season and during last year's NCAA tournament, where higher seeds won at a rate of 69%[2]. DraftKings' team of number crunchers dug deep into their data reserves, analyzing trends across bet types, working tirelessly to keep on top of the game.
"Our numbers tell us we've been dealing with a random streak," said DraftKings CEO Jason Robins in his Q1 earnings call, apparently unbothered by the chaos[2].
When Structural and Actual Hold Unite
March Madness took a break in 2020 due to the Covid-19 pandemic, but since then, the higher-seeded teams have dominated each year with a win percentage eclipsing 66%[3]. Prior to the pandemic, those numbers were slightly lower but still impressive, sitting at 68% and 69% in 2018 and 2019, respectively[3].
In the first few moments of the call, Robins addressed the ongoing trends of unfavorable sports outcomes, a predictable topic given the criticism that might follow[2]. When the time came for questions from analysts, Robins was grilled about the problem once more.
One theory Robins discussed surrounds the impact of Name, Image, and Likeness (NIL) deals, which have become increasingly lucrative, luring top players to powerhouse programs in major conferences[2]. Could the substance of these deals be shaking up the dynamics of March Madness and overall favorites in the sports world? That remains to be seen.
Robins also touched on DraftKings' impressive structural and actual holds, reporting a structural hold of 10.4% and an actual hold of 9.5% for Q1[3]. If the NIL trends persist, DraftKings could adjust its lines accordingly, allowing the two holds to come together like a well-choreographed dance[3].
AI: A Game Changer for DraftKings?
In a letter to shareholders, Robins emphasized DraftKings' embrace of an "AI-first" mindset, aiming to optimize speed, efficiency, and scale across the company[3]. When it comes to risk management, Robins is eager to see what AI can provide for the future.
Robins noted positive trends in in-game betting since acquiring micro-betting platform Simplebet and other offerings like SportsIQ and Mustard Golf[3]. In baseball, live betting now makes up about 36% of DraftKings' total volume, a significant impact registered by the acquisitions[3].
While DraftKings' hold can be a bit high for microbets, the company maintains a cautious approach, aiming to achieve a balance that will please both customers and shareholders[3].
A Bag of Mixed Results for DraftKings
In the span of Q1, DraftKings brought in $1.41 billion in revenue, falling slightly short of analysts' expectations of $1.45 billion[4]. However, the company reported an adjusted EBITDA of $102.6 million, outperforming analysts' guesses of $98.9 million[4]. Earnings per share came in at $0.12, right on target with analyst projections[4].
In light of the negative sports results, DraftKings adjusted its 2025 full-year revenue guidance, dropping the midpoint to $6.3 billion, with expectations of $6.2 billion to $6.4 billion[4]. Adjusted EBITDA was forecasted to land between $800 million and $900 million, a decrease from previous guidance in the range of $900 million to $1 billion[4].
DraftKings isn't the only sportsbook feeling the burn: every top sportsbook has discussed these headwinds during earnings season[4]. But Robins believes the patterns might raise questions about DraftKings' pricing mechanisms and algorithmic capabilities as they recur[4].
"The issue can become disconcerting if it persists for several years," warned a prominent Wall Street analyst[4]. ?"How the Fück does this keep happening?!" Robins may have thought, but he didn't say that out loud.
Other Notable Findings from DraftKings' Q1 Earnings Report
- Monthly Unique Payers: The average number of monthly unique paying customers jumped by 28%, reaching 4.3 million[4]. Strong unique payer retention and acquisition across DraftKings' sportsbook and iGaming offerings contributed to this increase.
- ARPMUPS: This metric fell by 5% to $108[4]. The abbreviation stands for "average revenue per monthly unique player." Though the overall number decreased, excluding the impact of the acquisition of Jackpocket, ARPMUPs increased by approximately 7%[4].
- Prediction Markets: In a brief mention, Robins indicated that DraftKings is keeping an eye on trends involving prediction markets, including recent court cases and commentary from state regulatory bodies and tribal gaming entities[4].
- Recession Preparedness: Robins believes DraftKings is well equipped to handle the evolving macroeconomic environment, pointing to the resiliency online gaming displayed during the global financial crisis[4].
- Jackpocket's Woes: Jackpocket stumbled in Texas after the state's lottery commission banned courier lottery services, leading to its departure from the market[4]. Though Robins is optimistic about Jackpocket's potential profits this year, a significant chunk of those profits were driven by its exit from Texas[4]. The company is working toward integrating Jackpocket into the DraftKings app before the end of the year.
In assessing their core value drivers, DraftKings highlighted that the metrics outperformed expectations, thanks to product enhancements boosting the sportsbook's structural hold and improving the deployment of promotions[4]. Not shabby, considering the turbulent waters they sailed through.
For the quarter, DraftKings' handle increased 16% year-over-year to $13.9 billion[4]. In vintage states where sports betting was available before 2024, handle surged 11% compared to the prior year's quarter[4].
And that's the skinny on DraftKings' Q1 earnings— riddled with adversity, aided by resilience, and continually guided forward by a burning desire to bring the hype to sports betting.
- Despite a challenging quarter, with unfavorable sports outcomes causing a $170 million dent in revenue and a $111 million pit in adjusted EBITDA, DraftKings managed to boost their earnings by 20%, a feat they attribute to their core value drivers.
- In the NCAA Division I men's basketball tournament, higher-seeded teams won at an all-time high rate of 82%, significantly impacting DraftKings' financial performance.
- DraftKings' CEO, Jason Robins, discussed the impact of Name, Image, and Likeness (NIL) deals on the sports world, suggesting that these deals might be shaking up the dynamics of favorite teams and events, such as March Madness.
- DraftKings is embracing an "AI-first" mindset, aiming to optimize speed, efficiency, and scale across the company, with a particular focus on risk management and using AI to improve their sportsbook offerings.
