DraftKings (DKNG) Q1 2026 Earnings Transcript

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Date

Friday, May 8, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Jason Robins
• Chief Financial Officer — Alan Ellingson

Takeaways

• Revenue -- $1.6 billion, representing a 17% increase year over year.
• Adjusted EBITDA -- $168 million, a 64% increase from the previous year; would have surpassed $200 million excluding investments in Predictions and Arkansas launch.
• Sportsbook Revenue -- $1.1 billion, a 24% rise year over year, with a net revenue margin increase of 140 basis points to 7.8%.
• Parlay Handle Mix -- Grew by nearly 300 basis points, indicating higher customer engagement in parlay products.
• Adjusted Gross Margins -- Increased by nearly 200 basis points year over year, reflecting operational efficiency improvements.
• Adjusted Operating Expenses -- Rose only slightly when excluding investments tied to Predictions and Arkansas expansion.
• Share Repurchase -- Nearly $100 million in stock was repurchased during the quarter.
• Positive Net Income -- Achieved positive net income for the second straight quarter.
• Predictions Category Investment -- Planned annual investment of $200 million to $300 million, weighted towards marketing and technology, with most spend set for later quarters.
• Customer Acquisition Cost (CAC) for Predictions -- Declined by over 80% in April following integration into the flagship app.
• Predictions Volume -- Annualized consumer volume exceeded $1 billion in April, while total volume traded reached $2.3 billion, representing month-over-month increases of 38% and 43%, respectively.
• Market Making Launch -- Market making introduced as part of Predictions, already generating a positive return and set for further expansion.
• April Operational Metrics -- Handle was up 6%, revenue advanced 22% year over year, and adjusted EBITDA exceeded $100 million (representing soft-close data).
• Fiscal Year 2026 Guidance -- Management reaffirmed revenue guidance of $6.5 billion to $6.9 billion and adjusted EBITDA of $700 million to $900 million; includes planned Predictions investment.
• Sportsbook Momentum -- Revenue growth exceeded 20% for most major sports, including NBA and NCAA men's basketball.
• Future Financial Reporting -- Beginning next quarter, Sportsbook and Predictions will be reported together as Sports revenue.
• Adjusted EBITDA Generation -- More than $500 million generated over the last 6 months.
• Legalization and Advocacy Spend -- $26 million spent in advocacy, primarily via a super PAC targeting various states; not tied directly to Predictions investment.
• iGaming Product Enhancements -- Introduction of Flex Spins promotion and increased marketing focus targeting slots-first players, aiming for future growth acceleration.

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Risks

• Early third-party data indicates, "Predictions customers are experiencing losses more quickly than Sportsbook customers," underscoring potential risks for consumer protection and regulatory scrutiny.
• Management cited the need to "grow Predictions the right way" and acknowledged peer operators may be acting irresponsibly in customer communications, signaling risk of adverse player experiences.

Summary

DraftKings (NASDAQ:DKNG) reported robust year-over-year growth in both revenue and adjusted EBITDA, driven by core Sportsbook strength and expanding contributions from the Predictions business. Management assigned strategic priority to accelerating investment in Predictions, with a $200 million to $300 million spend plan focused on marketing and technology, and highlighted rapid CAC improvement following product integration. The company launched market making within Predictions, reporting immediate profitability, and announced plans to unify Sportsbook and Predictions into a single reporting line—Sports revenue—starting next quarter. Legalization efforts increased, with advocacy spend of $26 million primarily supporting broad regulatory objectives rather than targeted product investment.

• April performance included 6% handle growth, 22% revenue growth year over year, and over $100 million adjusted EBITDA, based on preliminary figures.
• Management plans to intensify Predictions marketing efforts ahead of the World Cup, particularly targeting untapped U.S. states.
• Cost efficiencies were achieved through AI-first execution, streamlined teams, and declining payment costs, enhancing operational leverage.
• The iGaming division, though lagging on a year-over-year growth basis, underwent renewed focus with product innovation (Flex Spins) and new marketing approaches to attract non-Sportsbook customers.
• DraftKings will adjust marketing and investment pace for Predictions in response to real-time performance data throughout the year.
• Positive net income was recorded for the second consecutive quarter, with management expecting core business adjusted EBITDA to surpass $1 billion excluding Predictions investment.
• Management views the rollout of proprietary exchange, market making, and combo products as fundamental to building competitive advantage in the emerging Predictions ecosystem.

Industry glossary

• Parlay Handle Mix: The proportion of total bets involving multiple combined selections (parlays), implying higher risk and potential payout per wager.
• Market Making: Function in which an entity provides liquidity by facilitating buy and sell transactions, setting bid and ask prices in a trading ecosystem.
• Combos: Combined contract offerings in Predictions markets, similar to parlays, that allow for grouped outcomes or exposures.
• Super App: An integrated platform that consolidates multiple DraftKings products (Sportsbook, Predictions, iGaming, etc.) into a single user interface and account system.
• CAC (Customer Acquisition Cost): The total marketing and promotional expense required to acquire a new active customer.
• Flex Spins: A proprietary iGaming promotion allowing users to apply awarded spins to any slot game rather than being limited to specific titles.
• Handle: The total amount of money wagered by customers across sports betting or gaming platforms within a reporting period.

Full Conference Call Transcript

Jason Robins: Thank you, Mike. We are off to a fantastic start this year. Our first quarter results exceeded our expectations, and we continue to expect fiscal year 2026 revenue of $6.5 billion to $6.9 billion and adjusted EBITDA of $700 million to $900 million. In the first quarter, revenue increased 17% year-over-year and surpassed $1.6 billion. Adjusted EBITDA increased 64% year-over-year to $168 million. If not for our significant investment in Predictions and the launch of Sportsbook in Arkansas, our adjusted EBITDA would have exceeded $200 million. Profitability is inflecting in our core business. That gives us the firepower to press our advantage in Predictions. Predictions, especially in Sports, is a strategic priority for DraftKings.

This category is still in its first inning, and we believe DraftKings is best positioned to define it. We are planning significant investment in the coming months to improve our offering, build liquidity and scale customer acquisition. We intend to execute with urgency and establish a leadership position in Sports Predictions before year-end. At our Investor Day in March, we laid out a clear strategy, one nationwide Super App to win in Sports. Already, we are delivering on our plan. Predictions is now live in our flagship app. And as a result, our Predictions customer acquisition costs declined by more than 80% in April.

Within Predictions, we have more than doubled markets available to trade, which is driving Predictions volume per customer above Sportsbook handle per customer. In April, our annualized Predictions consumer volume exceeded $1 billion, and our annualized total volume traded exceeded $2.3 billion, an increase of 38% and 43% month-over-month, respectively. We have also launched market making, which unlocks access to an additional layer of the value chain. Market making is already generating a positive return for us. In the coming weeks, we expect to launch our proprietary exchange and begin offering combos. Together, these moves will accelerate innovation, improve the customer experience and strengthen our economics.

We are confident in sports Predictions because we increasingly view our Sportsbook capabilities as a key advantage. Sports Predictions and Sportsbook serve the same customers in the same live moments and leverage a shared underlying infrastructure. Whether the customer experience is structured as a bet or a contract, success still comes down to compelling markets, pricing, liquidity, trust and a seamless customer experience. That is why our sustainable advantage has made us a leader in Sportsbook and position us to lead in Sports Predictions, too. Beginning next quarter, we will report Sports revenue, which will combine Sportsbook and Sports predictions. This best reflects how we plan to operate the business. The opportunity ahead in Sports is massive.

At Investor Day, we laid out a path to a $55 billion to $80 billion gross revenue opportunity by 2030, along with at least a 30% long-term adjusted EBITDA margin. Predictions is an important part of this opportunity, broadening our reach, strengthening our Sports platform and driving meaningful incremental adjusted EBITDA over time. Experience and discipline matter in this category. Early third-party data suggests that Predictions customers are experiencing losses more quickly than Sportsbook customers, reinforcing the importance of trust, consumer protections and operator discipline. We have spent more than a decade building and managing these ecosystems from Fantasy to Sportsbook to iGaming, and we will apply that same discipline to predictions.

We will grow Predictions the right way: through data-driven decisions, constructive engagement with industry stakeholders and a focus on markets that uphold the integrity of sports, strengthen customer trust and align with our standards for responsible engagement. Our Super App, market-making capabilities, proprietary exchange and combos are coming together ahead of the World Cup. Our road map is clear. Our execution is real, and we intend to establish a leadership position in Sports Predictions by year-end. With that, I will turn it over to our Chief Financial Officer, Alan Ellingson.

Alan Ellingson: Thank you, Jason. I'll hit the highlights, including our first quarter 2026 performance and our fiscal year guidance. Please note that all income statement measures discussed, except for revenue, are on a non-GAAP adjusted EBITDA basis. As Jason mentioned, in the first quarter, revenue increased 17% year-over-year and surpassed $1.6 billion. Adjusted EBITDA increased 64% year-over-year to $168 million. If not for our significant investment in Predictions and the launch of Sportsbook in Arkansas, our adjusted EBITDA would have exceeded $200 million for the quarter. I'm also proud that we have achieved positive net income for the second consecutive quarter, continuing the progress that we've made on our profitability while repurchasing almost $100 million of our shares.

In the first quarter, Sportsbook led the way. Sportsbook revenue increased 24% year-over-year to $1.1 billion, and a net revenue margin increase of 140 basis points to 7.8%. Parlay handle mix increased by nearly 300 basis points. Revenue growth exceeded 20% across nearly all major sports, including NBA and NCAA men's basketball, reflecting continued enhancements to our offering and deeper media integrations. Across all key metrics, our Sportsbook business remains strong. We are also scaling efficiently. In the first quarter, adjusted gross margins increased by nearly 200 basis points year-over-year, and adjusted operating expenses increased only slightly when excluding our investments in Predictions and the launch of Sportsbook in Arkansas.

AI-first execution and streamlined teams are driving higher productivity than ever with some teams operating at 2 to 3x last year's output. We have generated more than $500 million of adjusted EBITDA over the last 6 months, reflecting effective execution and continued strength of our core business. Now I'll touch on our fiscal year 2026 guidance. In February, we guided fiscal year 2026 revenue of $6.5 billion to $6.9 billion and adjusted EBITDA of $700 million to $900 million. Importantly, the adjusted EBITDA guidance range includes significant investment in Predictions, which we see as a massive incremental opportunity for the company. Today, we are reaffirming these guidance ranges. That concludes our remarks. We will now open the line for questions.

Operator: [Operator Instructions] Your first question comes from the line of Jordan Bender with Citizens Bank.

Jordan Bender: To start with the guidance, Jason, it might get harder to parse out the cost now with the Super App. But are you starting to see investment spending like marketing come down across the Prediction Market business? And maybe on the flip side of that, how should we think about layering in some of the Prediction Market spend for the remainder of the year?

Jason Robins: Well, I think, first start with -- I think, we mentioned that CACs have been really dropping quickly, and it's scaling actually a little faster than we thought. So at this point, we are thinking we're going to probably invest about $200 million to $300 million all in on Predictions this year. A lot of that will be marketing, but some of that will be product technology investment as well. So what that means is that the rest of the business is going to do somewhere in the $1 billion-plus range in adjusted EBITDA this year, which we're really excited about. So that's the latest thinking. But obviously, we'll assess the data.

And as always, we'll follow what the numbers say.

Jordan Bender: Great. And then if I could just follow up on the guide. Revenue growth is strong across non-NFL events in the quarter, but handle has moderated a touch here. Can you just help us think about what handle looks like or the exit rate into 2Q here?

Jason Robins: Yes. Handle has actually been doing really nicely so far. So we actually just finished soft closing April. Handle was up 6%. We still have World Cup coming, which should be a boon. Also April revenue was up 22% year-over-year. We did over $100 million in adjusted EBITDA in April alone. So really feeling great about the way the quarter has started. And those are all soft close numbers, but should be roughly correct.

Operator: Your next question comes from David Katz with Jefferies.

David Katz: I'm sure there will be an ample number of Predictions questions. So I wanted to ask about the core business. Can we just talk about more specificity about what's left to do, whether that's product enhancement, interface improvements? What -- we know what the environment is. What are you doing? What's controllable for you in terms of moving the core business forward?

Jason Robins: It's a great question. So I think we still have a lot we can do to improve the offering. Right now, we feel like we have a number of things on the product road map, which will definitely deliver value. So really just clear line of sight to generating incremental retention and better value for the customer lifetime. I also think that there's a real opportunity in the iGaming side. We've lagged the market a little bit there. We've been very focused on sports naturally with the Predictions and everything else going on. And recently, we've beefed up a lot of like the team and effort on the iGaming side.

So I think there's a lot of opportunity to grow that as well. And then, of course, still half the country doesn't have legal sports betting, and almost 90% of the country we're not present in for iGaming. So tons of room left on the GA side to hopefully drive more legalization.

Operator: Your next question comes from Dan Politzer with JPMorgan.

Daniel Politzer: Just another on the core. Obviously, recognizing you guys don't give quarterly guidance, but just given some of the investor focus and moving pieces into the second quarter, can you kind of bridge us in how you think about some of those moving pieces for the second quarter, whether it's Prediction Market spend or launch costs or any of the kind of hold dynamics that you're seeing in the market?

Jason Robins: Well, on the core side, right now, we're seeing a ton of momentum. As I mentioned, we did over $100 million in adjusted EBITDA in April. Revenue grew 22% year-over-year. We've actually had 15 consecutive weeks of net revenue growth year-over-year. So really feel great about the core. We do expect we're going to start ramping our investment in Predictions. We've seen really, really strong numbers on the CAC side. The product is getting so much better. If you've used it recently, you'll see what we launched in December looks nothing like what you can use now. So obviously, still a ton of work to do there.

It's very, very early, but definitely plan on increasing investment there as the quarter progresses, especially with World Cup, which we think is going to be a big event, especially on the acquisition side.

Operator: Your next question comes from Stephen Grambling with Morgan Stanley.

Stephen Grambling: It looks like in the quarter that the promotional effectiveness improved on the core OSB side, even as a lot of the other folks in the industry have been talking about maybe worse CACs and that promotional effectiveness decreasing. So I'm curious what you attribute that to? And any kind of initiatives you have underway that you think could actually further improve the efficiency and how we should be thinking about it maybe as a percentage of handle or percentage of GGR?

Jason Robins: Yes, it's a great question. I mean, first starts with, we see a pretty stable competitive environment. It doesn't really look any different than it has in terms of the core business. Obviously, there's the Prediction side, but just focusing on our typical competitors. And so we've really been able to focus heavily on optimization. And I think one of the things that's been consistent with us as a company is we're very data-oriented. We're extremely strong on that front. And so the more time and the more data you give us, the better we can create efficiency and optimization.

And I think you're just seeing the results of some of that work over the course of several years really start to pay off. Also really doing great in terms of the top line side. So it helps to be more efficient in promotions when you're driving strong top line. Our hold rates have been increasing significantly year-over-year. Parlay mix has been going up. We see really no end to that continuing to go up in the near sight, really -- who knows where that ends? But right now, a ton of runway left to increase parlay mix. So lots of good tailwinds, I think, for the business right now. Promotional efficiency is one of them.

Operator: Your next question comes from Jed Kelly with Oppenheimer & Co.

Jed Kelly: Just on customer growth and MUP growth, I realize it was up low single digits ex the lottery. Can you just talk about trends there? I think there's a slide in your shareholder deck that says 30% of volume -- of Prediction Market volume in regulated states is coming from regulated markets. Is there something where younger customers that are like 18 to 20 just aren't shifting over to DraftKings as they get older? Or can you just talk about the MUP trends?

Jason Robins: Yes. I don't really think it has anything to do with Predictions. I mean if you look at the total customer numbers, they're quite small, single digits. There is volume, but most of that's coming from lower-margin customers as well as also just from market makers and things like that. I think the really important thing is the opportunity to grow MUPs and Predictions. We have the entire other half of the country now open to us, and we haven't even begun to ramp marketing. And if you look at our early Predictions data, it's very modest marketing investment. We are seeing really exciting things on the customer acquisition side and the CAC side.

So I think if you look at the back half of the year, you're going to see tremendous increase in MUPs for us really via Predictions customer acquisitions. So we're really excited about that. And I think that's kind of our main focus on the MUP side.

Operator: Your next question comes from Trey Bowers with Wells Fargo.

Raymond Bowers: I just wanted to kind of dig in a little further on just cadence, if we could. Your big peer out there set kind of targets for the next 3 quarters that are pretty heavily Q4 weighted. I know Q4 is generally the biggest seasonal quarter. But just any color around that, just so we make sure we're not kind of offsides on our models would be great.

Jason Robins: Yes. So I mean, I think you can expect pretty similar to what we've seen in past years. We don't expect any real difference in terms of the revenue side. Obviously, there are sport outcomes to contend with. So you have to look at that in more of a neutral sport-outcome world. But putting Sport outcomes aside, I think it will look pretty typical in terms of seasonality. Obviously, we do have Prediction spend layered in. I think you're going to see much more of that, of course, in the coming months than in the previous months. We have not spent much on the marketing side on Predictions yet. We do intend to spend more, as I mentioned.

We think the total investment for Predictions will be $200 million to $300 million with the vast majority of that coming really in the months ahead, especially in the back half of the year but some also in the later part of Q2. So I think that will obviously have a little bit of effect on the bottom line, but also, hopefully, we'll see great customer acquisition with that. And if we don't, we'll pull back. We're not signing up for a lot of committed spend. So it's very fluid, and we'll follow the data as we always do.

But in terms of the core business, I think you can assume a pretty similar quarterly cadence to what we've seen in the past.

Raymond Bowers: And just a quick follow-up, if I could. The advocacy spend in the first quarter was a pretty big number, at $26 million. Could you guys just break down a little bit what was involved there in terms of Prediction Market or states? And then just going forward, to what extent that represents a piece of kind of the Prediction Market investment?

Jason Robins: Yes, it's really not Prediction related. Actually, that was more of something that we are experimenting with our coalition that we lobbied together. We have a super PAC that we formed and are spending in various states. And we're going to try that strategy out for this election cycle, see how it goes and then assess whether it's something that we want to continue doing in future years.

Operator: Your next question comes from Brandt Montour with Barclays.

Brandt Montour: Jason, you mentioned some interesting stats on Prediction and specifically volume per customer, bigger than -- greater than OSB volume per customer. I was hoping maybe you could just flesh out a little bit more about what you've learned so far about the Prediction customer, especially with the stats you gave. What else have you learned about early sense for LTVs? And then, what are the sort of take rates that you're seeing early on against those volume stats that you gave?

Jason Robins: Yes, it's a great question. I mean it's very early, so hard to say. They do look quite similar. The stat that you cited that we mentioned, that is something we're seeing. I think that could also have a lot to do with the fact that it's still early and usually the most avid customers sign up early. So that's something we're bearing in mind. But if you look at kind of who these customers are demographically, what their spend patterns are, what sports, it's actually quite similar. There are a couple of things that are interesting. So college basketball, in particular, was even heavier on the Prediction side than maybe some of the other sports.

So that was something that we noticed as an example. And I think it's largely because the format is more of like a singles type of thing, win/loss, that sort of thing. So versus a sport like NBA, which on the Sportsbook side is very SGP heavy, and there's not a product that's sufficiently equivalent yet, in terms of Predictions, to make that as attractive. So there's probably some reasons for it that have nothing to do with the customer, but that is something we noticed. But largely, they look very similar. We're not seeing a whole lot of differences between who we're getting on the prediction side and who we have on our sports betting business.

Operator: Your next question comes from Ben Chaiken with Mizuho.

Benjamin Chaiken: My question is on the cost side of the core business, underlying, I think, performed well in the quarter. Maybe we could touch specifically on payments, which I believe is one of your larger individual expenses. How much of a focus is this for you? And anything you can share regarding the opportunity to lower this expense? And then kind of related, do you think the Super App provides any payment savings under the premise that users are maybe more engaged across multiple products and thus aren't kind of moving money in and out as quickly?

Jason Robins: Yes. I think it's a great point you make there that -- I do think part of the idea is increased retention, easier access to different products that we offer, different verticals. I think that is a huge part of the idea behind the Super App. And one of the results of that could be better retention of money and less movement of money on and off the system, which is a lot of what drives the payment costs as people depositing and withdrawing. So that's something we definitely will keep an eye on and could be a benefit. And I think even beyond that, there is a lot of room to optimize.

If you look at our overall payment costs, they have been coming down. That's been through a number of changes that we've made internally, but also through renegotiating rates as we've ramped our volumes. So that's generally the way it works, is as you ramp volumes, you get better rates. So I expect that to continue. And payments is an area that we look at this year and see definite opportunity in year to decrease that cost and certainly in 2027 and beyond.

Operator: Your next question comes from Shaun Kelley with Bank of America.

Shaun Kelley: Jason, I think market-making in Prediction markets has continued to be a focal point. Just kind of curious on where you're at on experimenting there? What have you learned on pricing? And just big picture, what's your willingness to kind of look at third-party platforms and/or potentially hedge via third-party platforms when you see some of the concentration risk that you've done combos and parlays as you get more experience with the product?

Jason Robins: Yes, it's a great question. So I think even beyond hedging, there's probably arbitrage moments and ways to just increase value. So that's something we're definitely looking at. Our market makers stood up in the last couple of months. So far, so good. We're making money. It's one of our fastest profitability business lines we've ever launched. So really excited about that. And we think a lot of opportunity to scale it. So we should theoretically have one of the top 2 or 3 market makers in the world, arguably the best, given our modeling capabilities.

So I don't see -- at least on the sports front, I don't see how anyone is going to be able to match that outside of maybe 1 or 2 of our big sportsbook competitors that also have really strong pricing models internally. So really feels like we can capture a big chunk of that. I do think that will involve being on third-party platforms. We will obviously focus on our own exchange as well, which is launching in the coming weeks, and we're excited about that.

But I think for us to really maximize the market-making opportunity, we want to be able to participate in different platforms and examples, like you said, not just to have more volume, but also to be able to manage risk across a much wider canvas. Just the more opportunity you have to do that, the better that we can optimize. I mentioned earlier, we're a very data-driven company. So the more we kind of have access to different ways to manage that risk, I think the better that we'll perform over time.

Operator: Your next question comes from Barry Jonas with Truist Securities.

Barry Jonas: Can we dig in more on the legalization outlook? Are there particular states you're focused on for iGaming or OSB in the near term? I'm curious if Prediction Markets has helped or hurt those efforts.

Jason Robins: I think in terms of Sports, Prediction Markets are helping. People are starting to really understand that if you haven't legalized sports betting yet, you have this thing called sports predictions now that is not within your own jurisdiction. And you still have companies like us that are very interested in doing it under the state framework. So I do think that is starting to resonate. Sometimes these things take a little time. So I'm not 100% sure we're going to get any over the line this year, but I do see increased momentum. And then I think on the iGaming side, I absolutely see momentum, particularly in the DMV area.

Washington, D.C. is strongly considering a proposal now, and Virginia came very close. It actually passed through both chambers but then died in conference. So hoping that, that one is really close and maybe next year, next session can be revived and get through. And then same thing on Maryland, we're seeing real momentum building there. So I think once we start to really break through in one of these regions, you typically see multiple states or in the case of D.C. jurisdictions that move too. And so not surprising to see momentum regionally like that. And I do expect that we'll start to see momentum develop in some of the Midwestern states, too.

I think Ohio next year is a good one to focus on. Illinois is always interesting. I don't see a clear path at the moment, but I think that could be one that comes into play. So lots of different opportunities there, and we'll have to see. But right now, I do think on the margin, having predictions is a huge advantage in terms of legalization. But I think it's been an even bigger tool in terms of pushing back on things like tax increases or any further restrictions. If you noticed, so far, we've had no tax increases this year. I hope I didn't just jinx us, but we've had no tax increases.

And I think a lot of that is because states are looking at predictions and saying we'd be absolutely crazy to raise taxes on legal online sports betting operators now when we're contending with prediction markets, which are not paying taxes in our state.

Operator: Your next question comes from Robin Farley with UBS.

Robin Farley: Great. Some other sportsbooks noted sport outcome hold impact in Q1. You haven't really mentioned that. Is that -- was your math better in Q1 and you didn't have a hold impact? Or is it just that your -- the rest of your business was strong enough to offset hold impact? If you could give us some color around that?

Jason Robins: We were actually slightly positive on outcomes. It was very minor. So we didn't really feel like it was necessary to call out. It was in the tens of millions, but we were slightly positive on sport outcomes in Q1.

Robin Farley: Okay. Great. And then just another one on Prediction Markets. Can you give us a sense of the profitability of the different layers of Prediction Markets that you're expecting to be involved in sort of where the most economics are for you when you think about whether it's market making or proprietary exchange? Or just how we can think about those layers?

Jason Robins: Yes. For us, it's really about having the whole ecosystem. And so it's hard to parse out where the value is because I think it feeds off each other. But we do see tremendous value in every layer of the ecosystem, which is why we're playing in all of them. In terms of profitability versus investment, the market maker should be -- or is profitable already. So that's going to be the one that's sort of the least capital intensive in terms of investment, and I think will produce really strong results in the near term and continue to grow. I think when it comes to more of the consumer-facing side of it, we will be investing in customer acquisition.

So I think that's going to end up being a little bit more of a headwind in 2026, and that's what's driving most of the $200 million to $300 million that we said we're investing in Predictions this year. So those are kind of the 2 layers. And then the exchange sort of sits in the middle. The exchange, I think, will be a little bit of product investment. But if you don't attribute any of the customer acquisition costs, that should be one that becomes profitable pretty quickly, too.

Operator: Your next question comes from Joe Stauff with Susquehanna.

Joseph Stauff: Jason, I was wondering if you could talk about your World Cup expectations. I think we have a pretty good idea for the tailwind and the impact of the World Cup on -- for the European bookmakers and customers, but the U.S. and North America is more unique. And is this more of an opportunity to expand the user base? How do you think about, say, the opportunity? And what you're thinking about World Cup expectations?

Jason Robins: Yes, it's a great question. So I have very high expectations for World Cup when it comes to customer acquisition and engagement. I'm not as sure it will be a huge revenue opportunity. The quantum of games, and I'm guessing the amount wagered on some of these, won't be quite as high as maybe you'll see an NFL or certainly NBA and some of these other sports. But I think it will be absolutely tremendous for customer acquisition, starting with these prediction states. So about half the U.S., including large states like California, Texas and Florida, we have never had a World Cup, never had any major marketing event in terms of -- something like this in those states.

So we're going to really go for it. Obviously, if the numbers are not supporting that, we will back off. But I have a feeling it's going to be very strong. And then the other thing I should mention is we recently launched a Spanish language app, I think -- or Spanish language functionality, excuse me, in our app. I think that also is a really interesting one, and we aim to have it in, which we did ahead of the World Cup, knowing that there could be some incremental audience to be acquired there.

And really being able to have a Spanish native experience, we think, will be a differentiator for us, even with people that might have signed up for the English product, just have a preference for the Spanish language product. So those are 2 things I'm really excited about, and we'll definitely be making an investment. And as I said, following the data. So it will either work or it won't, but we won't spend heavily into it if it's not working.

Operator: Your next question comes from Chad Beynon with Macquarie Capital.

Chad Beynon: The NBA saw record viewership this year. I know the programming was better than prior years, and you guys remain a partner with them. Can you just talk about if you're seeing share gains in the NBA? And then related to kind of all the big sports, how you're thinking about being an official partner if that's driving engagement?

Jason Robins: It was a great year so far for NBA. The playoffs have been tremendous, too, so far. So expect that to continue. I think being a partner has been a really important thing for DraftKings over many years. We've had a great relationship with the NBA since our Fantasy Sports days, really love what they have done with the sport and how they've grown engagement and made it such a broad sport in terms of the reach and the types of people that are fans. So I really give a lot of credit to the NBA, and we're proud to be a partner of that.

Operator: Your next question comes from Clark Lampen with BTIG.

William Lampen: I wanted to go back to the topic of core profitability. I think you mentioned at the top of the call, if it weren't for Prediction this year, you'd have over $1 billion. I think on top of that number, you've got about $4 billion in player-facing expenses. Just curious where those numbers could go over the next couple of years if we continue to see the rates of incremental penetration moderating? How much could you theoretically pull back, I guess, without impacting engagement?

Jason Robins: I mean, we have a lot of room to bring down marketing if that is warranted. I think right now, given the acquisition opportunity we see in predictions, we think it's more likely we'll be spending into it. And the partnerships that we have should be a huge asset for us in that. But I do think that in terms of the amount allocated to the core, you're going to see that continue to decline as Prediction spend ramps. So that's something that I think you'll see in the coming months and years. And really, for us, the sort of combination right now of moderating promotional and marketing spend on the core along with still strong top line growth.

As I mentioned, April was 22% year-over-year revenue growth, over $100 million in adjusted EBITDA in that month alone. That's really, I think, a sign that we see just continuing strength on the bottom line as we also continue to see strong growth on the top line. And obviously, that's what you want. So hopefully, we'll continue to see those trends.

Operator: Your next question comes from Bernie McTernan with Needham.

Bernard McTernan: Jason, the shareholder letter mentions that consumers are losing more in prediction markets than OSB. And that's just surprising to me, at least given the parlay penetration likely lower in prediction markets. So can you just talk about what you're seeing there? Because I think conventional wisdom would say that your hold will be lower in prediction markets than OSB, but just seeing how you think about that longer term?

Jason Robins: Yes. It's not necessarily hold as much as just the rate of loss. I think part of it is that predictions operators, some of them anyway, are sort of irresponsibly saying that this is not the same as a product like ours where you have people playing against each other on prediction markets when the reality is that most of the money is being put up, most liquidity is being put up by professional market makers, institutions, things like that. So I think some people don't necessarily understand that. And as that becomes more apparent, I think you'll start to see that moderate. But we saw this in fantasy sports.

When you have a peer-to-peer -- somewhat of a peer-to-peer setup, you're going to have people on one side that are experts and you got to make sure you protect the ecosystem as best as you can, obviously, within the rules and regulations, right? But doing things to make sure that you're building a healthy ecosystem was critical to us building out a sustainable daily fantasy sports product. And right now, I don't see that necessarily happening with some of our predictions competitors. But as time goes on, hopefully, we'll set the standard there, and it will be something that really becomes an important part of managing the ecosystem.

Operator: Your next question comes from Robert Fishman with MoffettNathanson.

Robert Fishman: Jason, you just mentioned your marketing partnerships. Does ESPN and NBC allow you to promote predictions through your Super App? And how do you plan to leverage those relationships with the ramp in the marketing that you talked about, especially ahead of the NFL season?

Jason Robins: Yes. So I mean, a huge part of having these national partnerships is being able to have a national singular sort of offering and message that we put out there. And that's been a core effort that we've been really focused on as we've thought about what our back half of the year and also remaining Q2 plans are for the Super App. So it's really less about advertising Predictions and more about advertising a unified DraftKings platform that's accessible in almost every state in the country. So that's something that we really feel excited about.

Having these great partnerships and relationships and having all of this data from having worked with these companies for so many years gives us a great foundational starting point, but there's also some testing and work we have to do to figure out how we unify that message in a way that makes sense for all consumers no matter what products they end up accessing.

Operator: Your next question comes from Jeff Stantial with Stifel.

Jeffrey Stantial: Maybe just digging into the quarter, it looks like NGR growth for online casino stepped down a bit quarter-on-quarter, 9%, versus you grew that business closer to 20% in 2025. Can you just sort of help us think about some of the drivers of this deceleration and whether there's anything sort of onetime in nature that contributed as well?

Jason Robins: Yes. I mean, I think that really, we see a huge opportunity there. We have lower growth than we think we should. Clearly, the overall industry demonstrates that. So there's a lot of changes that we've made on the product side and the marketing side in the last few months, and we see a huge opportunity to accelerate that. And hopefully, that's some upside. It's not something we're counting on in order to hit our guide. So if we can increase that growth rate, that provides a lot of upside for us.

Jeffrey Stantial: And maybe just to follow up to double-click on that. When you talk about sort of some changes being made, does this include sort of going after more of that iCasino direct player? Can you just sort of talk about that mix between OSB cross-sell and how much you're targeting that iCasino-led player?

Jason Robins: Absolutely. I think we've overly focused on the OSB cross-sell and did not focus enough on the iCasino first, particularly the slots first player, and we really increased our focus in the last several months there. One example of that is we launched a unique feature no one else has called Flex Spins, which has been a really great addition. It's -- everybody else sort of gives free spins by game. Flex Spins is a promotion that you can allow people to use on any game they want. So a very unique offering that no one else has.

We've also developed a lot of new marketing assets and have tested into some things that are working much better and have significantly reduced our CAC and ramp customer acquisition a lot in the last few months. So those are a couple of examples of where I see some tailwind there. And really, I think there's still a lot more we can unlock, too. We know that there are areas of opportunity that we haven't yet discovered and unlocked in iGaming. And I think there's a huge opportunity to grow that in the back half of the year.

Operator: Your next question comes from James Hardiman with Citi.

James Hardiman: So I wanted to actually circle back to the guide. Obviously, EBITDA guide is unchanged, but it now needs to absorb the Arkansas spend and any increase in Predictions. I was hoping maybe you could quantify those pieces. The $200 million to $300 million for Predictions, I don't think you were previously quite as explicit. So I guess, how much did that go up? What's the total Arkansas spend? I'm just trying to get my arms around what seems like a pretty big raise to the core business guidance, sort of the magnitude of that.

And if you don't mind, the split in Q1, I think it sounds like Arkansas and Predictions is about $33 million or more to get us to that $200 million EBITDA plus, but maybe split out between those 2 components?

Jason Robins: Yes, it's a great question. I mean Alberta is in there now, too. That will be launching, we believe, in July. So definitely some things we've been able to absorb. I think it starts with, we were pretty disciplined at the beginning of the year with the guidance. We knew that there was a chance that we would want to go very aggressive on Predictions. We also knew that we would probably have at least one, maybe multiple launches coming up with some rumblings in Arkansas and some thought towards Alberta at that time. So these are things we contemplated when we set the initial guide.

As far as like expectations, I think at the time, we kind of had ranges for each. And so there has been, I think, some tailwind. We also did, I think, have some conservatism in the initial guide, and that was deliberate because we wanted to make sure that as these things materialize, we were able to maintain and hopefully, as the year progresses, raise the guide. So that was the thinking going in and really not much has changed other than I think we've become a little more crystallized in some of these exact numbers, but nothing is too far off from where we initially thought it would be at the beginning of the year.

James Hardiman: Got it. Just to clarify, is there sort of a total Arkansas number for, I guess, at the end in this quarter end?

Jason Robins: We're not going to disclose an individual state. Yes, I don't want to say that, but it's not a huge number. I mean, it's in the low double digits.

Operator: Your next question comes from Ryan Sigdahl with Craig-Hallum Capital Group.

Ryan Sigdahl: Your main largest peer seems to be shutting down several product lines. You guys seem to be investing into Pick6. You launched DK Replay in Oregon, but really investing kind of across the product suite, obviously, with an emphasis on Predictions in the Super App. But curious how you think about kind of the adjacent and long tail of products you offer in the market, what those look like from a margin standpoint and if they're going to continue to be a focus or if it makes more sense to shift those players over to Predictions?

Jason Robins: Yes. I mean, I think, we're constantly evaluating these things. We have ourselves shut down products before we had a Reignmakers' NFT product, for example, that we shut down a couple of years ago. Right now, though, the ones you mentioned are all real success stories. And none of them are draining capital or resources in a material way outside of Predictions right now. So we think, obviously, Predictions is clearly one that we need to invest in, and we'll continue to. But things like Pick6 are kind of humming along at a really nice growth rate without really having to invest at a significant level. So we like products like that.

They provide incremental engagement revenue and don't cost the company a whole lot to maintain. But we are always evaluating and looking at what different things we're doing and making sure that we're deploying our capital and also our human capital and other resources in the best possible way to maximize value for shareholders.

Operator: Our final question comes from Steve Pizzella with Deutsche Bank.

Steven Pizzella: Just want to follow up on the Prediction Market spend. How much of that should we think about as onetime in nature this year versus more recurring as we think about next year?

Jason Robins: Well, I think, given this is our first real year with Predictions, we will want to invest in 2027 as well. Whether we're generating enough revenue to cover that and how that looks in terms of bottom line impact, it's way too early to tell. But I doubt that we are thinking -- the only way we'd be thinking of this as a onetime investment is if we weren't working, but then we wouldn't end up investing at these levels in the first place. But I don't expect that. I expect to see huge customer acquisition numbers in the back half of the year. Obviously, there's always the chance that something regulatory-wise or other changes.

But assuming a consistent environment to what we see today, I expect that we'll continue to invest in 2027.

Operator: We have reached the end of our Q&A session. I will now turn the call back to Jason Robins for closing remarks.

Jason Robins: Thank you all for joining us on today's call. We are really excited and well positioned for success. Thank you for your continued support and hope to speak to all of you again soon.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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