DraftKings’ $700 million prediction markets bet spooked Wall Street. Shares plunged as aggressive spending forced a sharp cut to 2026 profit guidance.

Trading volume is booming. Profits aren’t. DraftKings forecasts $700 million in 2027 Predictions revenue, but customer incentives are currently erasing most gross revenue.

The bigger gamble is customer loyalty. DraftKings is betting acquired users will remain profitable even if regulators shut down sports prediction contracts.

DraftKings is betting hundreds of millions of dollars on customers it may not be allowed to serve with the same products two years from now.

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Wall Street is not buying the math just yet, and shares of the online gaming company plunged nearly 30% following its third-quarter earnings report Thursday (Nov. 5) and investor call Friday (Nov. 6), where management slashed the company’s full-year profit forecast and outlined plans to spend as much as $700 million building its prediction markets business.

DraftKings reported third-quarter revenue of $1.33 billion, up 16% year over year but below analyst expectations of approximately $1.4 billion. The company’s quarterly losses also exceeded analyst forecasts. More consequential was the company’s reduction in 2026 adjusted EBITDA guidance to $175 million–$275 million, down from $700 million–$900 million.

Management attributed much of the decline to increased investment in Predictions, which is expected to consume $650 million–$700 million in adjusted EBITDA this year.

DraftKings has spent years demonstrating that online sports betting can become profitable at scale.

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