DraftKings 2025 Q1 Results: AI Mitigates March Madness Impact

DraftKings posted strong Q1 profits in 2025, even as March Madness dealt a financial blow.

The operator reported $1.41 billion in revenue, missing Wall Street’s $1.45 billion estimate. However, profitability beat expectations. Adjusted EBITDA reached $102.6 million, surpassing projections of $98.9 million. Earnings per share landed at $0.12, right in line with forecasts.

Tournament Favorites Hit the Books Hard

The NCAA men’s tournament heavily impacted revenue.

Top-seeded teams won 82% of the time, a historic rate. This betting skew led to a $170 million revenue loss. It also shaved $111 million from adjusted EBITDA.

DraftKings said it was the second quarter in a row where favorites dominated outcomes. Similar events occurred during the NFL’s 2024 finale. CEO Jason Robins assured stakeholders the patterns are “random, not systemic.”

College Sports and NIL Impact

Robins highlighted shifting dynamics in college sports.

NIL (Name, Image, and Likeness) deals are helping top programs attract elite talent. This, in turn, could reinforce the dominance of higher seeds going forward. Still, Robins emphasized that bettors generally lean toward favorites regardless of these trends.

DraftKings AI-Powered Risk Models Lead the Way

DraftKings is responding to volatility with AI innovation.

The company now takes an “AI-first” stance, applying automation to pricing and risk tools. Acquisitions like Simplebet, Mustard Golf, and SportsIQ are enhancing in-game betting. In-play wagers now make up 36% of baseball betting activity.

Despite fluctuating outcomes, the company’s actual hold came in at 9.5% against a theoretical hold of 10.4%, indicating models are performing as designed.

DraftKings Updated Forecasts Amid Variance

DraftKings revised its 2025 guidance downward due to recent revenue strain.

Projected full-year revenue now sits between $6.2 and $6.4 billion. This is down from the earlier $6.3 to $6.6 billion estimate. Adjusted EBITDA was lowered to $800–$900 million.

However, CFO Alan Ellingson remains confident: “Product, analytics, and promo strategies are improving steadily.”

User Growth and Handle Rise Despite Headwinds

Total handle climbed 16% year-over-year to $13.9 billion.

In legacy markets (pre-2024), handle rose 11%. Monthly unique payers increased 28% to 4.3 million users. However, ARPMUPs dipped 5% to $108, though without Jackpocket, it would have increased 7%.

Jackpocket Integration and Regulatory Moves

Lottery courier Jackpocket pulled out of Texas and New Mexico due to new rules.

Still, DraftKings expects Jackpocket to break even in 2025. Integration with the main app is planned by year-end. Robins also mentioned growing interest in peer-to-peer prediction markets in states without legalized betting.

Market Reaction and Investor Outlook at DraftKings

Before earnings, some analysts downgraded DraftKings.

BlackRock cut its stake by nearly 26%, ending Q1 with 23.1 million shares. Post-earnings, the stock rose 2% in after-hours trading to $35.35. By Friday, it peaked at $37.60 before settling at $36.50.

Despite volatility, DraftKings’ user growth, AI innovation, and cost control are keeping investor confidence intact. Long-term, though, outcome-based risk exposure could pose future challenges.