DKNG — Q2 2026 Financial Report Analysis

DraftKings took more bets than ever in the second quarter of 2026 but earned less on them. Customers wagered and traded $13.1 billion on its sportsbook and its new Predictions product, up 14.5% from a year earlier. Revenue still fell 4.6% to $1.44 billion, because the share of that money DraftKings kept dropped from 8.7% to 6.8%. The company blames two things: game results that went the bettors' way, and bigger sign-up promotions for new customers. Marketing spend also rose 38% around the FIFA World Cup, the NBA Playoffs and the launch of Predictions and the "Super App". Together that turned a $151 million operating profit a year ago into a $68 million operating loss.

At a glance

• $13.1 billion in Sports Consumer Volume (+14.5%). People are betting and trading more on DraftKings. The revenue miss came from pricing and luck, not from customers leaving.
• 6.8% Sports Net Revenue Margin, down from 8.7%. On this quarter's volume, every percentage point of margin is worth about $130 million of revenue. The 1.9-point drop cost roughly $250 million.
• Adjusted EBITDA of $115 million, down 62%. DraftKings kept its full-year guidance of $700–900 million anyway, so the second half has to earn $418–618 million.

The quarter in numbers

n/m = not meaningful (profit swung to a loss). The prior-year MUP figure is implied from the reported 9.1% increase.

Why revenue fell while betting rose

The key number for a sportsbook is not how much people bet but how much of it the house keeps. DraftKings reports this as Sports Net Revenue Margin: sports revenue divided by total settled wagers and trades. It is cut by two things. One is hold, the share of stakes the book wins after paying out winners, which swings with game results. The other is promotions, such as free bets and bonuses, which are deducted from revenue.

Both went against DraftKings this quarter. The 10-Q says the margin fell 1.9 points "primarily due to customer-friendly sports outcomes and higher promotions associated with new customers on our Sportsbook offering and Prediction Markets offering." The filing does not say how much came from each cause. Bad luck should even out over time. Bigger promotions are a choice and may not. Over the first six months, the margin was 7.3%, close to 7.4% a year earlier, because a stronger first quarter offset the second.

Volume growth came from users. MUPs (customers who placed at least one real-money bet or entry in a month) rose 9.1% to 3.6 million. The filing credits "engagement on the NBA Finals and FIFA World Cup" and new customers on Predictions, which launched in December 2025. Revenue per user (ARPMUP) fell 12.6% to $132, which is the margin problem showing up again per customer.

iGaming (online casino), which carries no sports-outcome risk, grew 7.5% to $461.9 million. The filing credits "improved promotional reinvestment," meaning DraftKings spent less on casino bonuses relative to play. Other revenue rose 5.2% to $89.4 million, helped by a new Keno lottery product.

Where the profit went

Adjusted EBITDA fell by $186 million. Three lines explain nearly all of it:

• Sports revenue fell $106 million. Most of that drops straight to profit.
• Gaming taxes rose $17.7 million to $519.6 million while revenue fell. Taxes rose from 33.2% to 36.0% of revenue, "due to tax rate increases in certain states." Overall cost of revenue reached 61.8% of revenue, up from 56.5%.
• Sales and marketing rose $89.3 million (+38.3%) to $322.5 million, or 22.3% of revenue against 15.4% a year ago. The filing links it to customer acquisition for the World Cup, the NBA Playoffs, the Super App and Predictions.

Product and technology spending also rose 17.7% to $127.6 million. General and administrative costs rose only 2.3%, but that small change combines $19.9 million of new advocacy spending with $9.5 million less stock compensation.

What the headline numbers hide

• The adjusted figures leave out a cost that is starting to recur. DraftKings excluded $19.9 million of "advocacy and other related legal expenses" from adjusted EBITDA this quarter, and $46.2 million in the first half. The money went to pushing iGaming legalization and a sportsbook ballot measure. The company calls it non-recurring, but it now shows up in back-to-back quarters. Stock-based compensation, also excluded, was $82.6 million, or 5.7% of revenue (5.6% a year ago). The gap between GAAP and adjusted results is large: a $67.6 million net loss against $114.6 million of adjusted EBITDA.
• Last year's profit had help. Q2 2025 net income included a $24.5 million "other gain," mostly from revaluing contingent consideration (acquisition earn-outs). This year that line was only $3.8 million. The swing to a loss still comes almost entirely from operations: operating income fell $218.8 million, and taxes moved in DraftKings' favor by $13.6 million.
• Some of the revenue change comes from a reclassification. Interest earned on customer deposits now sits in revenue (within "Other") rather than in interest income. That pushed net interest from $0.7 million of income to $7.4 million of expense. It also lifts revenue a little against last year. The 10-Q does not give the dollar amount.
• Cash flow is thin but positive. Operating cash flow for the first six months was $63.0 million against a $46.5 million net loss. Customer-balance timing helped: liabilities to users fell from $935 million to $840 million, and the filing points to "timing of player activity" and vendor payments. Cash was $983.9 million at quarter-end, down from $1.13 billion in December. Debt includes $1.265 billion of convertible notes due March 2028 and a $592.5 million term loan.
• Buybacks slowed. DraftKings bought back 2.3 million shares for $55.6 million in the quarter, against $100.5 million a year earlier. The share count did not drive EPS: the swing was operational.
• Legal risk around Predictions is new. Three lawsuits filed between July 28 and August 3, 2026 claim that DraftKings Predictions offers unlawful sports wagering. The 10-Q lists them, with no loss estimate.

Takeaway: Customers are betting more, so the business is not shrinking. The quarter turned on DraftKings keeping less of each bet and spending heavily to win Predictions customers. Luck should recover, but the promotions and the Predictions marketing are choices management says it will keep making.

Outlook

DraftKings kept its fiscal 2026 guidance of $6.5–6.9 billion in revenue and $700–900 million in adjusted EBITDA. That is the same range it confirmed with first-quarter results on May 7. The CFO said the "core business remains on track to generate approximately $1 billion of Adjusted EBITDA this year." Set against the $700–900 million guided, that implies roughly $100–300 million of Predictions investment this year.

Taking first-half results from the full-year range, the second half needs $3.41–3.81 billion of revenue and $418–618 million of adjusted EBITDA. The first half produced $282 million. That is a steep back-half ramp, though the NFL season usually makes the second half DraftKings' strongest. The low end leaves room for another quarter of poor hold. The high end needs normal game results and promotion spending that falls once the summer acquisition push ends. Our read: the volume trend (+14.5% in Q2) supports the revenue range. Profit depends on whether Sports Net Revenue Margin recovers toward the 7.3% first-half level and whether rising state gaming taxes keep eating into it. In the Q3 report, look at that margin, at sales and marketing as a share of revenue, and at whether advocacy spending keeps being excluded from adjusted figures. (This report is based on the 10-Q for the quarter ended June 30, 2026, filed August 7, 2026, and the same-day earnings release.)