DraftKings (DKNG) is dialing back its 2025 forecast after an unusual winning streak during March Madness.
In a rare twist, too many bettors won big during this year’s NCAA basketball tournament, one of the most heavily wagered sporting events in the U.S.
That surprise winning streak hurt DraftKings’ bottom line, and now the company expects to make less money this year than it originally thought.
In its Q1 earnings report, DraftKings said “customer-friendly sport outcomes year-to-date” knocked an estimated $170 million off revenue and $111 million off adjusted EBITDA.
DraftKings now thinks it’ll bring in a bit less money this year than it first expected, between $6.2 billion and $6.4 billion instead of up to $6.6 billion. It also cut its profit outlook.
For the quarter, DraftKing earnings came in below what Wall Street was looking for.
DraftKings made $1.4 billion in revenue, short of the $1.46 billion forecast, and reported earnings of $0.12 per share instead of the expected $0.20.
DraftKing stock is up 2.5% after the earnings and flat year-to-date.
Too many Favorites, too many winners
CEO Jason Robins told Yahoo Finance the outcome came down to an unusually predictable March Madness. All four #1 seeds made the Final Four, and 82% of favorites won, the highest rate ever for the tournament.
That meant bettors who took the safe route with heavy favorites had an unusually high chance of winning. The result was that DraftKings paid out more than expected.
“I think it was a bit of an anomaly,” Robins said. He added that new dynamics like NIL deals could lead to more dominant teams in the future, forcing the company to adjust its models.
“But I don't expect that sort of favorite’s run to happen most years in March Madness or any sport for that matter.”
Even so, Robins said it's “a great aspect of the product” that customers can go on winning streaks like this, and it helps create excitement.
Despite the rough quarter, Robins said he isn’t concerned about a pullback in betting activity if the economy weakens.
“It’s pretty clear that gaming and online gaming has really shown resiliency through macroeconomic downturns,” he said.
He pointed to Europe’s online gambling growth during the 2008–09 financial crisis, a time when the U.S. market was still largely closed to legal online betting.
“That, in addition to us looking at our own metrics and seeing very healthy customer metrics across the board, gives us confidence that we’re really resilient to any economic environment.”
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