How DKNG (DraftKings) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a sports betting and online gaming company like DraftKings (DKNG) makes money is essential for investors and anyone interested in the business of sports wagering and iGaming. In this post, we break down DraftKings's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick DraftKings Overview

DraftKings operates as a digital sports entertainment and gaming company, providing online sports betting, daily fantasy sports, and iGaming products across the United States and select international markets. Revenue comes primarily from sports betting handle (wagers placed), iGaming (casino games and slots), and daily fantasy sports contests, with all reported revenue aggregated under "Other Revenue by Product" in Q3 2025. The company benefits from expanding legalized sports betting in additional states, driving user acquisition and engagement through mobile apps and partnerships with sports leagues.

Revenue Breakdown

• Total Revenue (Q3 2025): $1.144B (+4.4% YoY)
  • Other Revenue by Product: $1.144B (100% of total)
  • Gaming Software Revenue: $0M (0% of total)
  • Online Gaming Revenue: $0M (0% of total)
  • Growth is powered by increased sports betting handle and market expansion, despite the extreme YoY growth figure of 11694% for the aggregated "Other" category likely reflecting reporting changes or prior-period low base.

Gross Profit and Margins

• Gross Profit: $359.9M (31.5% gross margin)
  • Cost of Revenue: $784.1M (+5.6% YoY)
  • DraftKings maintains robust margins due to its scalable digital business model, where platform costs are largely fixed while revenue grows with user volume and handle.
• Most costs come from platform hosting, payment processing, gaming taxes, and variable payouts to winners.

Operating Income and Expenses

• Operating Income: Not specified (implied negative given operating expenses exceeding gross profit)
• Operating Expenses: $517.2M (-20.6% YoY)
  • R&D: Not specified
  • SG&A: $517.2M (-5.6% YoY, 45.2% of revenue) — Covers sales, marketing, general administration, and customer acquisition efforts in a competitive industry.
  • DraftKings continues to prioritize innovation and growth while maintaining efficiency through cost controls, as evidenced by the sharp YoY decline in total operating expenses.

Net Income

• Pre-Tax Income: Not specified
• Income Tax: Not specified (0% effective tax rate implied)
• Net Income: $256.8M (-12.6% YoY, 22.4% net margin)
• DraftKings converts a significant portion of sales into profit due to scalability, operational leverage, and potential non-operating income or tax benefits offsetting operating losses.

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What Drives DraftKings's Money Machine?

• Sports Betting and Handle: 100% of revenue derived from aggregated product revenue, primarily driven by sports betting wagers amid U.S. legalization tailwinds.
• User Growth Metrics: Revenue growth tied to average monthly unique payers (MUP) and handle per user, with Q3 reflecting steady 4.4% YoY expansion.
• Marketing Investment: Heavy focus on user acquisition and retention through promotions and partnerships.
• Future growth areas: International expansion and iGaming in new states, though not yet fully reflected in segment breakdowns.

Visualizing DraftKings's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A at 45.2% of revenue) taking the largest chunk.
• Even after significant costs, 22.4% of revenue drops to the bottom line.

Key Takeaways

• DraftKings's money comes overwhelmingly from sports betting and aggregated gaming products.
• High gross and net margins illustrate the power of DraftKings's digital scalability.
• Heavy investment in SG&A for growth, balanced by efficiency in operating costs with -20.6% YoY decline.
• Ongoing growth is driven by U.S. market expansion and handle increases.

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FAQ About DraftKings's Income Statement

1. What is the main source of DraftKings's revenue in 2025?

DraftKings generates over 100% of its revenue from Other Revenue by Product in Q3 2025. This aggregates sports betting, iGaming, and fantasy sports, with no separate breakdown for Gaming Software or Online Gaming in the reporting.

2. How profitable is DraftKings in Q3 2025?

DraftKings reported net income of $256.8M in Q3 2025, with a net margin of approximately 22.4%, reflecting strong profitability driven by gross margins and cost discipline despite high SG&A.

3. What are the largest expense categories for DraftKings?

The biggest expenses on DraftKings's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A investment reached $517.2M in Q3 2025, as DraftKings prioritizes customer acquisition and platform expansion.

4. Why does the operating level appear pressured?

Operating expenses of $517.2M exceeded gross profit in Q3 2025, leading to implied operating losses. This is because DraftKings aggressively invests in growth areas like marketing and technology, believing these will drive long-term user retention and revenue—even if short-term operations face pressure.

5. How does DraftKings's effective tax rate compare to previous years?

DraftKings's effective tax rate in Q3 2025 was 0% (implied). This low rate is primarily due to tax benefits, net operating loss carryforwards, or non-operating items contributing to net income.