DAVY VIEW

The focus of DraftKing’s Q4 update was on the FY26 guidance. The mid-point of the revenue guidance of $6.7bn is 7.6% behind our forecasts and implies year-on-year (yoy) growth of 11%. The aEBITDA guide of $800m is c.20% below our forecasts; however, it does include unquantified prediction market (PM) investment (at the mid-point). It has not broken out the quantum of this investment but, at a c.45% drop through, FY26 EBITDA would be closer to $900m. The revenue growth guidance is somewhat underwhelming and key on the call today will be the extent to which management can articulate the building blocks and whether this implies built-in conservatism. On the more positive side, the statement, presentation and shareholder letter give good confidence that PMs are not impacting its regulated online sports betting revenue and give bullish commentary on the revenue opportunity.