How DraftKings Makes Money: Business Model Explained

The Short Answer

DraftKings Inc. makes most of its money by taking sports bets and running online casino games in states and provinces where those products are licensed, then keeping a built-in margin on the amounts customers wager. In fiscal 2025, the company reported revenue of $6,054.5 million, of which Sportsbook supplied $3,827.1 million, iGaming $1,804.6 million and other products $422.8 million. Gaming taxes absorbed $2,110.6 million of that revenue, which shapes how the business is run.

This analysis reads the company’s fiscal 2025 annual report on Form 10-K and its February 12, 2026 earnings release. It explains the revenue lines, the cost structure and the customer metrics the company reports, then compares 2025 with 2024 and 2023. DraftKings is analyzed here as a business, using its own definitions and the corporate name rather than a consumer view of its products. The figures are as of the filing dates, and nothing here is investment advice.

What DraftKings Sells and to Whom

DraftKings reports one consolidated segment. According to its annual report, its revenues are predominantly generated through two offerings, Sportsbook and iGaming, which together made up 93% of revenue in fiscal 2025, 93% in 2024 and 91% in 2023. The company also offers daily fantasy sports (DFS), a digital lottery courier service, prediction markets and other products, and it licenses software it designs for its own Sportsbook and iGaming products.

The Sportsbook earns money by setting odds that build in a theoretical margin on each proposition, as the filing describes. When customers lose, the company keeps the stake; when they win, it pays out. Short-term results swing with outcomes, which is why the company describes a long-run margin rather than a fixed one. Our explainer on how sportsbooks make money walks through hold and the margin built into odds, and GGR vs NGR covers how gross and net revenue differ.

Geography matters because licensing decides where each product can operate. In its February 12, 2026 release, DraftKings said it was live with mobile sports betting in 26 states and Washington, D.C., with iGaming in five states, and with both products in Ontario, Canada. Licensing, not demand alone, sets the addressable market, and state tax rules then decide how much of each dollar of revenue the company keeps. The company also reported that it launched DraftKings Predictions on December 19, 2025, a new product line whose economics are not yet visible in annual results.

Where the Money Comes From: Fiscal 2025

DraftKings reported revenue of $6,054.5 million for fiscal 2025, compared with $4,767.7 million in 2024, according to its earnings release and annual report.

The 27.0% growth rate follows from the reported dollars.

Sportsbook economics depend on two company-defined measures. Sportsbook Handle is the amount wagered, which was $53.6 billion in 2025. Sportsbook Net Revenue Margin is Sportsbook revenue as a share of handle, which the company reported at 7.1%. Dividing $3,827.1 million by $53.6 billion gives about 7.1%, consistent with the reported figure.

On the customer side, the company reported 4.0 million average monthly unique payers (MUPs) and average revenue per MUP (ARPMUP) of $125 for 2025. ARPMUP is revenue divided by average MUPs over the period, so it reflects how much each paying customer generates, not how many there are.

What the Cost Structure Means

The most revealing line in the filing is gaming taxes. The company’s segment note shows gaming taxes of $2,110.6 million, shown separately within cost of revenue, against $1,658.1 million in 2024. That is about 34.9% of 2025 revenue and about 34.8% of 2024 revenue, so the burden was nearly unchanged as a share of revenue even as dollars rose 27.3%. The filing shows these taxes rising roughly in step with revenue, which means growth alone does not widen the share kept.

The rest of cost of revenue, labeled “Other” in the segment note and adjusted for depreciation and stock-based compensation, was $1,189.9 million. On the income statement, sales and marketing was $1,379.9 million, about 22.8% of revenue, down from 26.5% in 2024. Operating leverage showed up in marketing and administration: general and administrative expense fell from $764.1 million to $673.6 million while revenue grew. The company still reported a small operating loss of $15.8 million in 2025, against a loss of $609.0 million in 2024.

Adjusted EBITDA, a non-GAAP measure the company defines in its release, was $620.0 million in 2025 and $181.3 million in 2024. That is a 10.2% margin against 3.8%. The company reported net income of $3.7 million, its first positive full-year result in the three years shown. The company’s own framing, attributed to its CEO in the release, is that it sees an incremental opportunity in prediction markets and plans to deploy growth capital there. That is a statement of management intent, and the filings do not yet show what it will cost or earn.

Three Years of Growth

Over fiscal 2023 to 2025, DraftKings’ revenue grew 30.1% in 2024 and 27.0% in 2025. The table shows what drove it.

The drivers changed between the two years. In 2024, handle grew 28.6% from $37.4 billion to $48.1 billion while the margin rose from 5.6% to 6.0%. In 2025, handle grew only 11.4% but the margin rose 1.1 percentage points to 7.1%, a relative rise of about 18%. Margin, which depends partly on customer outcomes, supplied most of the 2025 gain. The reported MUPs rose 8.1%, and ARPMUP rose 17.9% from $106 to $125.

For a peer reference point, see our analysis of Flutter Entertainment’s business model, which covers a larger, more diversified operator, and Flutter’s Q2 2026 results for its latest reported quarter. The two companies define metrics differently, so their figures should not be mixed without checking definitions. For DraftKings’ more recent quarter, read DraftKings’ Q2 2026 results.

Limits and Misreadings

A hold swing can be mistaken for a trend. Margin is an outcome, not a plan: the company’s own filing says results and betting patterns can cause short-term volatility. A 1.1-point gain in one year does not establish where the margin will settle, and this analysis makes no forecast.

Several figures are company-defined. Adjusted EBITDA, MUPs, ARPMUP and Net Revenue Margin follow DraftKings’ own definitions, and the Q4 release shows how an acquisition can change comparisons: fourth-quarter MUPs were unchanged year over year at 4.8 million, but rose 5% excluding Jackpocket. Comparing these metrics with another operator’s requires checking definitions.

The 2025 net income of $3.7 million is small relative to $6,054.5 million of revenue, and it sits beside an operating loss. Other income and tax items moved the bottom line, and stock-based compensation of $339.3 million remains a real cost excluded from Adjusted EBITDA. The filings also list risks the company itself identifies, including licensing, taxation and regulation across jurisdictions. The figures are as of February 2026 filings, and later periods may differ.

Key Figures and Definitions

The table lists the main reported figures. MUPs are average monthly unique paying customers; ARPMUP is revenue per MUP; handle is the amount wagered; Adjusted EBITDA is the company’s non-GAAP earnings measure.

Related Analysis

To see how this model played out in a recent quarter, read DraftKings’ Q2 2026 results. For how a global peer is built, see Flutter Entertainment’s business model. The foundations behind the numbers are in how sportsbooks make money and GGR vs NGR. The next question to watch is how the new prediction markets line appears in the company’s reported results.

Sources & References

• DraftKings Inc. — Annual Report on Form 10-K, fiscal year ended December 31, 2025 (SEC)
• DraftKings Inc. — Segment Information note, Form 10-K fiscal 2025 (SEC)
• DraftKings Inc. — Fourth quarter and fiscal 2025 results, February 12, 2026 (investor relations)
• DraftKings Inc. — Form 8-K, Exhibit 99.1, February 12, 2026 (SEC)