DraftKings (NASDAQ: DKNG), the mobile gaming and sports betting platform, recently reported its quarterly earnings. The results were mixed—there were several encouraging trends but also a few cautionary signs that investors should take note of.
In this article, I’ll break down the key takeaways from the earnings release, examine how DraftKings is positioning itself in the current economic environment, and update my valuation and investment recommendation for the stock. I’ll also explain why I continue to rate DraftKings as one of the top nine stocks to buy in 2025.
Earning Overview
DKNG reported earnings of $0.12 per share for the latest quarter, falling short of the Zacks Consensus Estimate of $0.18. Despite the miss, this still marks a significant year-over-year improvement from a loss of $0.30 per share in the same quarter last year. All figures are adjusted for non-recurring items.
The earnings miss represents a negative surprise of 33.33%. This follows a larger-than-expected loss in the prior quarter, when the company posted a loss of $0.28 per share compared to expectations of a $0.19 loss—a surprise of -47.37%.
Over the past four quarters, DraftKings has exceeded consensus EPS expectations just once, raising questions about the predictability of its near-term financial performance.
Share Performance and Market Context
So far in 2025, DraftKings shares are down 6.8%, underperforming the S&P 500, which is down 4.3% year-to-date. While the broader market has struggled, DraftKings' weaker-than-expected results have likely contributed to its relative underperformance.
Fundamental
DraftKings reported 20% year-over-year revenue growth for Q1, which came in below expectations. However, the company reaffirmed its full-year outlook with 32% revenue growth projected for 2025, and 36% growth expected across Q2 through Q4. This guidance suggests the slower Q1 was an outlier.
A primary reason for the Q1 miss? Customer-friendly outcomes. In the world of sports betting, sometimes the house doesn’t win. The company cited a $170 million revenue headwind and a $111 million EBITDA hit due to favorable outcomes for bettors. While that impacts near-term financials, there’s a long-term silver lining: when customers win, they tend to come back more frequently. This could boost engagement and monetization in future quarters.
What’s Next for DraftKings?
Investors now turn their attention to what's ahead for DraftKings. Much will depend on management's guidance and commentary from the earnings call, particularly regarding growth, cost efficiency, and customer trends.
The company's earnings outlook is a key metric to watch. The current consensus calls for EPS of $0.39 on $1.46 billion in revenue for the upcoming quarter, and EPS of $1.65 on $6.37 billion in revenue for the full fiscal year.
The direction and magnitude of earnings estimate revisions will be especially important in the coming weeks. Historically, there has been a strong correlation between short-term stock movements and changes in analyst estimates.
DraftKings Is Benefiting from an Industry Shift
One of the more promising developments in the online gaming sector is a trend toward lower promotional spending across the industry. DraftKings reported more efficient deployment of marketing promotions—a signal that customer acquisition costs are coming down, not just for DraftKings, but industry-wide.
This is a critical competitive dynamic. In my stock evaluation framework (detailed in my new book), one of the six key factors I look for is the intensity and direction of industry competition. In sectors like EVs, we've seen brutal price wars and promotional arms races destroy profitability. But in mobile gaming, we’re witnessing the opposite—rational competition and margin improvement.
This trend has been building for several years, and it’s one of the reasons I highlighted DraftKings early in 2025 as a top pick.
Economic Environment: Headwind or Opportunity?
As the U.S. economy slows in the wake of post-tariff trade realignments and tighter monetary policy, many consumer-facing businesses are struggling. However, DraftKings is proving resilient.
During the global financial crisis of 2008–2009, gaming held up surprisingly well in mature markets. DraftKings believes that resilience is still in play today, as it reports strong engagement, deposit activity, and average bet sizes—metrics that continue to align with forecasts.
Interestingly, advertising costs are falling, which is helping DraftKings lower its customer acquisition costs even further. With many brands pulling back on ad spend, DraftKings is able to acquire traffic and customers more cost-effectively than before—another subtle benefit of the current macro backdrop.
Guidance
DraftKings ended the quarter with $1.1 billion in cash and repurchased nearly 4 million shares—signs of confidence in its financial health and future profitability.
Despite the Q1 miss, DraftKings maintained a strong full-year outlook. The company now expects $6.3 billion in 2025 revenue, down slightly from previous guidance of $6.45 billion. Adjusted EBITDA is also expected to be slightly lower, largely due to the aforementioned customer win streaks.
Importantly, this updated guidance does not include any revenue contribution from new state launches like Missouri. While new markets don’t typically add much in year one, they help expand DraftKings’ reach and allow the company to spread national advertising costs across a broader base—improving scalability.
Valuation
According to my proprietary discounted cash flow model, I calculate an intrinsic value of $53.71 per share for DraftKings. With the stock recently trading around $36.41, that implies about 30% upside from current levels.
In addition, DraftKings trades at a forward P/E of 50.56, which is reasonable given its growth in revenue, cash flow, and profitability. For a company with strong momentum, improving margins, and long-term growth tailwinds, this valuation remains attractive.
Final Verdict: Still One of the Best Stocks to Buy
After analyzing the most recent earnings report, I remain confident in DraftKings as one of my top stock picks for 2025. In fact, I feel even more bullish following this update.
Despite a temporary revenue headwind from customer-friendly sports outcomes, the long-term outlook remains robust. DraftKings is executing well in a consolidating industry, managing costs effectively, and seeing signs of improving scale and profitability. Its balance sheet is strong, and the valuation offers meaningful upside.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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