DraftKings' Q3: Can a New Acquisition Outrun Old Losses?
DraftKings (DKNG) is set to release its Q3 2025 results on November 6th, and the pressure is on. Analysts are projecting revenue between $1.24 billion and $1.40 billion, which would be an approximate 11% year-over-year increase. Not exactly barn-burning growth, especially when you consider the expected per-share loss of around $0.27. That's the headline, but as always, the devil is in the details.
The Marketing Spend Conundrum
Let's rewind to Q2. DraftKings reported an adjusted profit of $0.38 per share, but that missed analysts' expectations of $0.41. The real kicker? Sales and marketing spending was a whopping $233 million, up 8% year-over-year, while top-line growth was 37%. Now, any sane person can see the disconnect. Are they spending too much to acquire customers? Is that customer acquisition actually translating into long-term loyalty, or are they chasing fleeting bets? This is the part of the report that I find genuinely puzzling. The number of unique users on their wagering platform was flat from Q1 to Q2. Flat! You spend more to get the same number of people? Something isn't adding up.
And that's not all. DraftKings' stock is down nearly 50% from its 52-week high reached in February 2025. Bearish sentiment, we're told, is nearly exhausted. But I'm not so sure. The market doesn't just randomly decide to punish a stock by half. There’s usually a reason, and in this case, it's the nagging suspicion that DraftKings is burning cash faster than it's minting it. The upcoming earnings report is being touted as a potential catalyst for a stock recovery. But will it be? Or will it simply confirm the market's worst fears? Will DraftKings be able to curtail spending while still growing at an acceptable rate?
Railbird Acquisition: A Glimmer of Hope?
The recent acquisition of Railbird, an event-based betting platform, adds another layer to the story. The timing is interesting – a couple of weeks before the Q3 results. Is this a strategic move to diversify their offerings, or a desperate attempt to juice the numbers and distract from underlying problems? The announcement was light on specifics. How much did they pay? (Details on the acquisition cost remain scarce, but the impact on the balance sheet will be closely scrutinized.) What are the projected synergies? And, most importantly, how quickly can Railbird be integrated and start contributing meaningfully to revenue?
DraftKings is also talking up its AI strategy, as mentioned in their Q1 2025 letter to shareholders. Investors are supposedly awaiting more details on how AI will drive growth. But let's be real, every company is talking about AI these days. It's the new buzzword, and it's often used to mask deeper issues. What specific AI applications are they developing? How will these applications demonstrably improve profitability? Show me the data.
Growth at Any Cost?
DraftKings has come a long way from its fantasy sports roots. The lifting of the federal ban on sports wagering in 2018 turned the company into a major player, and they're also pushing into the digital casino space. Revenue hit nearly $4.8 billion in 2024, up about 30%—to be more exact, 28.6%—from the previous year. The expectation is that they'll report a full-year profit for 2025. But is this growth sustainable? Rivals like Kalshi and Polymarket are nipping at their heels. The space is getting crowded, and the cost of acquiring and retaining customers is only going to increase. It's a classic "growth at any cost" scenario, and those rarely end well. Before the Q3 report, here are 3 Things I'll Be Looking for in DraftKings' Earnings Report on Thursday - The Motley Fool.