Here's What DraftKings Layoffs Could Mean for the Stock

DraftKings (NASDAQ: DKNG) is moving forward with a restructuring that could see it lay off a sizable portion of its workforce. In a recent note on the stock published by Citizens, the firm's analysts estimated that workforce reductions would come in at the lower end of the 2% to 15% range that has been the norm among tech companies recently.

In the note, Citizens reiterated a market-outperform rating on DraftKings stock and set a one-year price target of $38 per share. As of this writing, that target implies upside of roughly 72%.

Image source: Getty Images.

Layoffs could help support stronger earnings growth

DraftKings has grown revenue at an impressive clip in recent years thanks to the expansion of betting legalization and rising interest in sports betting. Revenue increased 27% annually to reach roughly $6.05 billion last year, but the company is now seeing sales growth decelerate in the absence of legalization in new markets and signs of saturation in the betting market. For 2026, the company is targeting sales between $6.5 billion and $6.9 billion -- suggesting annual growth of roughly 11% at the midpoint of the guidance range.

As noted in Citizens' recent report on the stock, DraftKings has increased the size of its workforce by roughly 31% over the last several years. The company ended 2025 with more than 5,500 employees across 13 countries.

With growth seemingly poised to slow substantially in the near term, reducing its workforce could allow DraftKings to reduce its operating expenses and improve net-income margins. The company shifted into posting positive net income last year, and a further pivot to focusing on profitability over sales expansion this year looks like a sensible move as factors outside of its control have become less conducive to revenue growth.

DraftKings stock is down roughly 35% year to date, and shares trade down 69% from their lifetime high. With the company focusing on efficiency and still seemingly on track to post double-digit sales growth this year, earnings could grow at a rapid clip this year.

With its last quarterly update, DraftKings outlined a target for non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) between $6.5 billion and $6.9 billion -- up from roughly $620 million last year. An improvement on that scale could help power a resurgence in bullish momentum for the stock. On the other hand, the market will still be looking for indications of what the growth picture looks like for sales and earnings next year and whether the company can continue making efficiency moves to supercharge earnings growth while still keeping sales growing at a solid clip.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.