DraftKings Cuts 2025 Outlook, Says Favored Teams Winning Drives Lower Margins

It’s said the house always wins in gambling. But as sports betting and iGaming statistics and algorithms continually improve, the favorite often wins, too.

That was the news that DraftKings executives shared Friday (May 9) on the company’s first-quarter 2025 earnings call, explaining to investors that an unusually “customer-friendly” March Madness tournament trimmed the platform’s potential upside for the quarter, with high seeds ultimately winning at a record rate (82%) for the NCAA men’s basketball tournament and leaving DraftKings with less of an edge.

“Customer friendly,” after all, means that bettors are winning their bets.

Still, Q1 revenue was $1.41 billion, representing a 20% year-over-year increase from $1.18 billion in Q1 2024, according to a Thursday (May 8) press release . Executives on the call said DraftKing’s evolving strategic focus — particularly in using artificial intelligence — resulted in greater platform resiliency. They also pointed to the volatility inherent in the sports betting business model.

“Recent product enhancements are driving outperformance in our core value drivers, and our customer metrics continue to be strong through an evolving macroeconomic environment,” DraftKings CEO and co-founder Jason Robins said in the release. “If not for customer-friendly sport outcomes in March, we would be raising our fiscal year 2025 revenue and adjusted EBITDA guidance.”

Robins said on the call that enhancements to the company’s betting options, such as micro-betting features and proprietary jackpots, have helped in differentiating its offering in a competitive landscape.

Read also: Are Cryptocurrency Payments in the Cards for DraftKings?

AI and Product Innovation as Strategic Levers

A key theme in DraftKings’ earnings narrative was its “AI-first” mindset. The company said in a Q1 business update that AI will help drive speed, scale and efficiency across its operations. Early outcomes of its AI initiatives have accelerated product development and enhanced customer support experiences.

The company continues to invest in differentiated product features. Integration of engines from Simplebet , Sports IQ and Mustard Golf has enabled DraftKings to offer more unique betting options than competitors, particularly in live and micro-betting formats, the business update said. In iGaming, the company’s proprietary jackpot offerings continue to gain traction, including a record-setting $9.3 million jackpot hit in February on a 20-cent wager.

Still, DraftKings reduced its full-year 2025 revenue guidance to between $6.2 billion and $6.4 billion, a decrease from previous guidance between $6.3 billion and $6.6 billion. It also revised its adjusted EBITDA guidance to between $800 million and $900 million, a drop from previous guidance between $900 million and $1 billion, per the release.

These adjustments reflect a $170 million revenue headwind and $111 million EBITDA headwind from sport outcomes year-to-date, offset partially by $50 million in revenue and $37 million in EBITDA uplift from continued strength in core operating metrics, according to the business update.

The unprecedented outcome of March Madness, favorable to casual bettors, dented DraftKings’ sportsbook margins during the quarter.

“Our analyses provide us strong confidence that the recent volatility we’ve experienced is random in nature,” the business update said.

The company is also monitoring federal activity around prediction markets, as court rulings and legislative developments could affect adjacent areas of its operations. At the same time, responsible gaming remains a core pillar of its strategy, with features like “My Stat Sheet” used by nearly half of its customer base and more than 11 million visits to responsible gaming tools recorded in Q1, according to the business update.

See also: US Sports Gambling Industry Totals $220 Billion Since 2018

The company’s monthly unique payers increased to 4.3 million average monthly unique paying customers in Q1, representing an increase of 28% year over year. This increase reflects strong unique payer retention and acquisition across DraftKings’ Sportsbook and iGaming product offerings and the impact of the acquisition of Jackpocket , the press release said.

The PYMNTS Intelligence report “ Generation Instant: Gaming and Winnings ” found that gaming companies are not fully tapping into the consumer demand for instant payouts, missing an opportunity to elevate customer satisfaction and loyalty.

Separate research by PYMNTS Intelligence found that 79% of gamblers prefer instant payouts, and 76% of those without access to them would choose them, if available. Fewer than half of players had access to instant disbursements, spotlighting a gap between expectations and reality compared to physical casinos.