DraftKings Inc. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. DraftKings Inc. operates as a digital sports and gaming company offering Sportsbook, iGaming, Fantasy, Lottery, and Prediction Markets. As of the reporting date, the company operates its Sportsbook in 29 U.S. jurisdictions and Ontario, Canada, and its iGaming offering in six U.S. jurisdictions and Ontario. The company recently acquired Railbird Technologies to expand into prediction markets.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $1,646.1 million | $1,408.8 million |
| Net Income (Loss) | $21.1 million | ($33.9 million) |
| Adjusted EBITDA | $167.9 million | $102.6 million |
| Diluted EPS | $0.03 | ($0.07) |
| Operating Cash Flow | ($48.4 million) | ($119.0 million) |
| Cash & Equivalents | $999.4 million | $1,119.7 million |
| Total Debt (Principal) | $1,859.0 million | $1,859.0 million |
Note: Debt includes $1,265.0 million in Convertible Notes and $594.0 million in Term B Loan principal.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 16.8% year-over-year, driven by a 24.1% increase in Sportsbook revenue and an 8.9% increase in iGaming revenue. Sportsbook Net Revenue Margin improved to 7.8% from 6.4%.
- Profitability: The company returned to GAAP profitability with $21.1 million in net income, compared to a $33.9 million loss in Q1 2025. Adjusted EBITDA grew 63.5% to $167.9 million.
- Expense Management: Sales and marketing expenses rose 16.9% due to new state launches (Missouri, Arkansas) and the Prediction Markets offering. General and administrative expenses remained relatively flat despite a $26.4 million increase in advocacy and legal expenses, offset by lower stock-based compensation.
- Key Performance Indicators: Monthly Unique Payers (MUPs) decreased 3.6% primarily due to the exit from the Texas Lottery market. However, excluding Lottery, MUPs increased 2.1%. Average Revenue Per MUP (ARPMUP) increased 21.3% to $131.
Outlook, Risks, and Unusual Items
- Acquisition: The company acquired Railbird Technologies for approximately $84.8 million in total consideration (cash, equity, and contingent) to launch Prediction Markets. Operating results from Railbird were immaterial for the quarter.
- Legal Proceedings: The company faces numerous litigation risks, including patent infringement suits (Winview, Micro-Gaming, Interactive Games), consumer protection class actions regarding promotions and responsible gaming (Macek, Youngs, Scanlon), and regulatory challenges in Texas and California. Management states it cannot estimate potential losses for many of these matters.
- Capital Allocation: The company repurchased 3.3 million shares for $98.6 million under its $2.0 billion stock repurchase program. It also maintains a $500 million revolving credit facility with $488.1 million available.
- Tax Position: The company recorded an income tax provision of $6.4 million. While currently maintaining a valuation allowance on deferred tax assets, management noted that future profitability could lead to a reversal of this allowance.
Investor Verification Checklist
- Regulatory Exposure: Verify the status of the Texas Attorney General lawsuit and the California AG opinion regarding Daily Fantasy Sports, as these could impact market access.
- Patent Litigation: Monitor the outcomes of the Winview and Micro-Gaming patent disputes, which could result in injunctions or substantial damages.
- Debt Covenants: Confirm compliance with the Net First Lien Leverage Ratio covenant (4.50:1.00) under the Credit Agreement, though the company was not required to test it in Q1 2026.
- Contingent Consideration: Track the fair value adjustments of the $37.8 million contingent consideration liability related to the Railbird acquisition.
- Consumer Protection Lawsuits: Review the progression of class actions regarding "risk-free" promotions and responsible gaming features, which could alter marketing strategies or require operational changes.