DraftKings (NASDAQ: DKNG) delivered first-quarter 2026 results that beat revenue expectations by 1% and cash flow expectations by 8%, prompting Macquarie analyst Chad Beynon to reiterate his view that the company represents “one of the most compelling structural growth stories in gaming.”
US revenues reached $1.6 billion, up 17% year-on-year, while adjusted EBITDA of $168 million surged 64% compared to the same quarter in 2025. The company achieved positive net income for the second consecutive quarter, marking a meaningful milestone in a business that spent years investing aggressively in customer acquisition ahead of profitability.
Sportsbook revenue drove the headline numbers, growing 24.1% year-on-year to $1.09 billion despite betting handle rising only 1.5% to $14.08 billion. That divergence between handle growth and revenue growth is explained by a meaningful expansion in net revenue margin, which improved from 6.4% to 7.8% as DraftKings’ hold rate improved. iGaming revenue contributed a further $461 million, representing 8.9% year-on-year growth and now accounting for nearly 28% of total group revenue. Management confirmed full-year 2026 revenue guidance of $6.5 billion to $6.9 billion with adjusted EBITDA of $700 million to $900 million, maintaining the ranges communicated at the start of the year despite the strong Q1 performance.
The most strategically significant element of the quarter was the update on DraftKings Predictions, the company’s proprietary prediction market platform that launched in December 2025. CEO Jason Robins stated on the earnings call: “With our Super App, market making capabilities, proprietary exchange, and combos coming together, we intend to establish a leadership position in sports predictions before year-end.” The company’s super app, which integrates sportsbook, iGaming, fantasy and predictions products within a single interface, already succeeded in reducing prediction market customer acquisition costs by 80% in the month following its launch, a figure that materially changes the unit economics of building out that business.
Beynon highlighted the prediction market opportunity’s structural differentiation from DraftKings’ existing sportsbook business. According to data presented in the Q1 slides, nearly 70% of predictions sports consumer volume from the leading US operator comes from states where traditional online sports betting is not yet legal. That geographic distribution means predictions is not cannibalising the sportsbook business but rather reaching an entirely new customer pool in states where legislators have been unable or unwilling to legalise sports betting directly. The implication is that predictions could eventually accelerate the legalisation conversation in those states, as governors and lawmakers observe consumer demand for legal wagering alternatives moving to a federally regulated format rather than offshore sites.
DraftKings CFO Alan Ellingson told investors at a MoffettNathanson fireside session: “We see Predictions as a monstrous opportunity as a great way for us to leverage experience that we already have. But we see it as the next evolution of DraftKings, and we’re excited to see what it comes out of it.” The phrasing of “next evolution” rather than supplemental revenue source signals management’s ambition for the product to eventually stand alongside the sportsbook rather than beneath it in terms of scale. The company has previously guided for a $200 million to $300 million EBITDA impact from prediction market investment in 2026, meaning the near-term costs of building out the platform are already reflected in full-year guidance.
Macquarie’s note drew a comparison to DraftKings’ own playbook from the 2018 legalisation of sports betting following the PASPA ruling. The company used its daily fantasy sports infrastructure and customer relationships to build a market-leading sportsbook position in a way that pure-play new entrants could not replicate. Beynon believes the same dynamic applies to predictions, where DraftKings’ technology, brand recognition, customer data and marketing relationships give it advantages over Kalshi and Polymarket that would take years and enormous capital for competitors to overcome. The stock jumped 8.64% in the week of the Q1 report, reflecting genuine investor confidence that the prediction market opportunity is real rather than aspirational.
