How Prediction Market Traders Won on Domino's Earnings Miss

Traders looking for a potentially tasty way to kick off the week may have considered Domino's Pizza (NASDAQ: DPZ), which delivered fourth-quarter results on Monday morning.

Pizza aficionados and market participants with bullish perspectives on the pizza delivery/takeout chain took heart in knowing that Polymarket traders were positioned for a Domino's earnings beat. As of late Sunday, 64% of Domino's earnings event contracts on that prediction market were "yes," meaning those traders are wagering the company will beat the consensus earnings-per-share forecast of $5.38 a share for the final three months of 2025.

If Polymarket traders are right, Domino's Pizza will beat Q4 earnings estimates. Image source: Getty Images

Traders looking at the Polymarket route should know this: If you're buying "yes" contracts on an event like Domino's earnings, the contract resolves in your favor if the company reports earnings of at least $5.39 per share on the basis of generally accepted accounting principles (GAAP).

As it turns out, Domino's missed the earnings target with a result of $5.35 per share. A "no" contract would have paid off this time.

Prediction markets may offer insurance on earnings reports

These days, controversy and prediction markets go hand in hand with much of the negative public relations swirling around yes/no exchanges attributable to companies' moves into what state regulators perceive as sports wagering.

Emerging hope and speculation suggest that some in the investment community want prediction markets to become far more than mere alternatives to standard sportsbooks. Professional investors and traders want cases relevant to them. Earnings reports, including the imminent one courtesy of Domino's, can add to the non-sports use case for prediction markets.

For example, an investor who didn't own shares of Domino's but wants to participate in potential earnings-related upside could have purchased a "yes" event contract on the company beating EPS estimates in advance of the report. Likewise, a market participant holding the stock but seeking a hedge could have bought "no" derivatives on a yes/no exchange.

For outright bearish traders, "no" contracts on an earnings report may be less risky than outright shorting a stock.

Domino's missed the $5.38 per share Q4 estimate, but its 2026 EPS guidance came in above the $19.54 Wall Street expected. The stock rose on the news. Holders of "no" event contracts won their wager and could still buy shares afterward to participate in the rally.

Mixed views on Domino's

Looking at the pizza franchise from a fundamental perspective, a mixed bag emerges. Analysts believe some restaurant chains will benefit from lower payroll taxes and higher tips. Still, Morgan Stanley recently lowered its rating on Domino's to equal weight from overweight and cut its price target by 15%, citing a challenging narrative.

The other side of the Domino's coin is evidence that some members of the "smart money" group are bullish on the stock. For example, the restaurant chain was one of just four previously existing positions Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) boosted in the last three months of 2025.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Domino's Pizza. The Motley Fool has a disclosure policy.