DraftKings posts over $1B in revenue for Q3, lowers 2024 guidance due to customer-friendly sports outcomes

DraftKings announced its financial results for the third quarter of 2024, showcasing strong revenue growth as it broadens its Sportsbook and iGaming offerings across the U.S. and Canada. For the quarter ending September 30, the sports betting giant posted $1.1 billion in revenue, a 39% year-over-year increase compared to $790 million for the same period in 2023.

However, the company has revised its full-year revenue and adjusted EBITDA guidance downward due to customer-favorable sports outcomes early in the fourth quarter.

DraftKings’ revenue increase of $306 million from the previous year was attributed to sustained customer engagement, an effective strategy for acquiring new users, and expansion into new jurisdictions. This growth was further propelled by DraftKings' acquisition of Jackpocket, which closed in May. 

The company’s user base expanded considerably, with Monthly Unique Payers (MUPs) rising to an average of 3.6 million in the third quarter—a 55% increase over the same period last year.

DraftKings CEO and Co-founder Jason Robins

CEO and Co-founder Jason Robins stated: “DraftKings delivered strong performance in the third quarter with the return of NFL and college football. With major sports converging on the calendar, we are well-positioned to build on this momentum as we further enhance our top-ranked sportsbook app with additional live betting features and exciting new NBA markets.”

While MUPs saw notable growth, Average Revenue per MUP (ARPMUP) decreased by 10% from the third quarter of 2023, primarily due to Jackpocket customers, whose spending patterns differ from traditional DraftKings users.

Excluding Jackpocket’s impact, however, ARPMUP saw an 8% increase, supported by DraftKings’ stronghold in structural sportsbook hold percentage and promotional reinvestment in both Sportsbook and iGaming.

DraftKings also reported an adjusted EBITDA loss of $59 million for Q3, an improvement from prior periods and a reflection of effective promotional optimization and expense management strategies.

However, DraftKings has to adjust its full-year 2024 revenue expectations to a range of $4.85 billion to $4.95 billion, down from an initial forecast of $5.05 billion to $5.25 billion. This revision takes into account customer-friendly sports outcomes in the early fourth quarter, which affected the company's projections.

The company’s adjusted EBITDA guidance for 2024 has also been revised, now estimated between $240 million and $280 million, down from a previous projection of $340 million to $420 million. 

DraftKings introduced revenue guidance of $6.2 billion to $6.6 billion, representing approximately 31% year-over-year growth, looking ahead to 2025. The company projects adjusted EBITDA for 2025 to be between $900 million and $1 billion, aiming to deliver sustainable growth through continued expansion of its Sportsbook and iGaming offerings, improved customer retention, and strategic promotional investments.

DraftKings CFO Alan Ellingson

CFO Alan Ellingson highlighted the company’s revenue ambitions, stating: “The midpoint of our inaugural fiscal year 2025 revenue guidance equates to 31% year-over-year growth, and we are well-positioned to deliver $900 million to $1 billion of Adjusted EBITDA in 2025.”

DraftKings currently operates mobile sports betting in 25 states and Washington, D.C., collectively covering nearly half of the U.S. population. Its iGaming products are available in five states, representing 11% of the U.S. market, and the company has also launched its Sportsbook and iGaming offerings in Ontario, Canada, covering approximately 40% of Canada’s population.

The company is preparing to enter Missouri following a recent vote to legalize sports betting in the state. DraftKings expects to launch its Sportsbook product there, pending the necessary regulatory approvals and licensure. Similarly, the company plans to launch its Sportsbook operations in Puerto Rico as it works to secure market access.

Despite the adjusted 2024 outlook, analysts have generally maintained a favorable view of DraftKings' growth trajectory. JMP Securities continues to view the company positively, pointing out DraftKings' strong underlying fundamentals.

Analysts noted that while “bad outcomes happen in this business,” the recent Q4 sports outcomes don’t detract from the company’s foundational performance. JMP maintained its Market Outperform rating on DraftKings, setting a price target of $51.

Truist Securities, while recognizing the guidance adjustment, indicated optimism that DraftKings’ revised forecast may prove conservative as the NFL season continues through the fourth quarter. The firm is reviewing its models and valuation in light of the revised guidance and is expected to release further insights after DraftKings’ earnings call.