DraftKings' Revenue Volatility Rises as Outcome Swings Intensify

DraftKings Inc. DKNG is contending with one of the most pronounced periods of sportsbook volatility in recent memory, and the past quarter underscored just how quickly customer-favorable outcomes can distort results. With more than $300 million in revenue impact tied to a concentrated stretch of NFL games across September and October, the company’s short-term performance reflected pressures that masked underlying operational strength. Yet even as DraftKings absorbed these swings, management emphasized that the core fundamentals — handle growth, product depth and retention improvements — remain intact and are critical to sustaining long-term margin progression.

In the third quarter of fiscal 2025, DraftKings delivered 10% Sportsbook handle growth, followed by 17% growth in October, demonstrating resilient engagement despite headline volatility. These gains came alongside improved NFL and NBA activation, with retention metrics advancing year over year. But the quarter’s revenue profile was shaped primarily by customer-friendly outcomes, leading DraftKings to revise its fiscal 2025 outlook to $5.9-$6.1 billion in revenues (compared with the prior expectation of $6.2-$6.4 billion) and $450-$550 million in adjusted EBITDA (compared with the prior expectation of $800-$900 million). The outcome impact stands in sharp contrast to the fiscal second quarter, when favorable events contributed approximately $100 million in additional revenues and supported record profitability.

Management noted that rising parlay mix — while structurally positive for long-term margin — also amplifies periodic variance when outcomes cluster within a narrow window. This has been evident across the sector, but DraftKings’ national scale means swings can be more visible in quarterly reporting. Even so, the company continues to lean on disciplined liability controls, selective hedging and improved risk management tools to moderate exposure without constraining growth.

Regulatory dynamics add complexity, including state-level tax changes and ongoing promotional limitations that vary across markets. But DraftKings reiterated that its long-term model is designed to withstand outcome-driven noise, supported by expanding customer cohorts, higher structural hold and more efficient marketing deployment.

As DraftKings navigates one of the most volatile stretches of the year, the central question is less about the temporary impact of outcomes and more about the durability of the company’s structural advantages. With strong engagement trends, a growing product ecosystem and disciplined cost management, DraftKings is positioning itself to offset periodic swings while reinforcing the long-term economics of its sportsbook model.

DKNG’s Price Performance, Valuation & Estimates

DraftKings’ shares have declined 34% in the past three months compared with the industry’s fall of 4.2%. In the same time frame, other industry players like Accel Entertainment, Inc. ACEL and Boyd Gaming Corporation BYD have declined 7.9% and 2.3%, respectively, while Melco Resorts & Entertainment Limited MLCO has gained 5%.

DKNG Three-Month Price Performance

DKNG stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 2.05, well above the industry average of 2.75. Conversely, industry players, such as Accel Entertainment, Melco Resorts and Boyd Gaming have P/S ratios of 0.63, 0.71 and 1.64, respectively.

The Zacks Consensus Estimate for DraftKings’ 2025 earnings per share has declined 22.1% to $1.13 in the past 60 days.

The company is likely to report strong earnings, with projections indicating a 207.6% rise in 2025. Conversely, industry players like Melco Resorts and Boyd Gaming are likely to witness a rise of 157.9% and 8.7%, respectively, year over year in 2025 earnings. Meanwhile, Accel Entertainment's earnings are likely to decline 38.5% year over year in 2025.

DKNG currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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