Is DraftKings' Product-Led Parlay Growth Driving Better Economics?

DraftKings Inc. DKNG continues to make measurable progress in strengthening the underlying economics of its Sportsbook business, an area that has remained central to investor debate amid persistent earnings volatility tied to sports outcomes. During the third quarter of 2025, management highlighted a sharp acceleration in parlay penetration, a structural mix shift that is increasingly shaping hold rates and long-term margin potential — even as near-term results were distorted by unfavorable betting outcomes.

A key driver of this shift has been the sustained rise in parlay handle mix across major sports. NFL parlay mix increased by approximately 800 basis points, while NBA parlay mix rose by roughly 1,000 basis points, representing one of the strongest year-over-year gains the company has recorded. Management attributed this momentum to continued product enhancements, including improved parlay-building functionality, stacked bet features and targeted promotions such as Ghost Leg, alongside improving promotional efficiency rather than an expansion in promotional intensity. As a result, DraftKings’ Sportsbook net revenue margin is now on track to expand by more than 400 basis points versus four years ago, underscoring a structural improvement in bet mix that may support more consistent margin outcomes over time.

This progress was partly masked by unusually customer-friendly sports results. Management said adverse NFL outcomes in September and October cut revenues by over $300 million, weighing on third-quarter results and prompting a lower full-year outlook. Crucially, the company stressed this volatility is temporary and does not change the business’ long-term earnings power, as sports results tend to even out over a full season and represent a small share of annual revenues over time.

Operational indicators continue to reinforce this view. Sportsbook handle increased 10% year over year in the third quarter to $11.4 billion, while early fourth-quarter trends showed further acceleration, with total handle up 17% year over year in October. Engagement metrics also remained healthy, supported by improving customer retention and rising parlay adoption.

Looking ahead, management reiterated confidence that continued parlay mix gains and promotional discipline can support potentially improving margin consistency over time, even as quarter-to-quarter results remain sensitive to sports outcomes. While volatility is inherent to the model, the ongoing shift toward higher-value bet types suggests DraftKings’ Sportsbook economics are becoming structurally more resilient as the business scales.

DKNG’s Price Performance, Valuation & Estimates

DraftKings’ shares have declined 21% in the past three months compared with the industry’s fall of 10.3%. In the same time frame, other industry players like Accel Entertainment, Inc. ACEL and Melco Resorts & Entertainment Limited MLCO have declined 0.6% and 16.5%, respectively, while Boyd Gaming Corporation BYD has gained 1.5%,

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 2.35, below the industry average of 2.67. Conversely, industry players, such as Accel Entertainment, Melco Resorts and Boyd Gaming have P/S ratios of 0.67, 0.63X and 1.76, respectively.

The Zacks Consensus Estimate for DraftKings’ 2026 earnings per share has declined in the past 60 days. 

The company is likely to report solid earnings, with projections indicating a 100.4% surge in 2026. Conversely, industry players like Accel Entertainment and Boyd Gaming are likely to witness a rise of 10.6% and 7.1%, respectively, year over year in 2026 earnings. Meanwhile, Melco Resorts’ earnings are likely to increase 70.7% year over year in 2026.

DKNG currently has 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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