How DKNG (DraftKings) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a digital sports entertainment and gaming company like DKNG makes money is essential for investors and anyone interested in the business of online betting and gaming. In this post, we break down DKNG's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick DKNG Overview

DKNG operates a leading platform for online sports betting, iGaming, and daily fantasy sports. Its business model centers on providing digital wagering experiences, leveraging proprietary technology and partnerships with major sports leagues.
Revenue comes primarily from online gaming and betting products, including sportsbook, casino, and fantasy sports contests. The company’s single reported segment, "Other Revenue by Product," reflects its consolidated approach to monetizing digital entertainment.

Revenue Breakdown

• Total Revenue (Q2 2025): $1.51B (+36.9% YoY)
  • Other Revenue by Product: $1.51B (100% of total, +11,107.1% YoY)
  • Growth is powered by expansion into new markets, increased user engagement, and product innovation.

Gross Profit and Margins

• Gross Profit: $657.9M (43.5% gross margin)
  • Cost of Revenue: $854.6M (+28.8% YoY)
  • DKNG maintains robust margins due to its scalable digital business model and operational efficiencies.
• Most costs come from gaming operations, technology infrastructure, and payment processing.

Operating Income and Expenses

• Operating Income: $150.6M (flat YoY, 10.0% margin)
• Operating Expenses: $507.3M (+7.2% YoY)
  • R&D: $108.4M (+17.0% YoY, 7.2% of revenue) — Focused on enhancing platform features, security, and user experience.
  • SG&A: $398.8M (+4.8% YoY, 26.4% of revenue) — Includes marketing, sales, and administrative functions supporting growth and compliance.
  • DKNG continues to prioritize innovation and invest in growth while maintaining efficiency in operations.

Net Income

• Pre-Tax Income: $169.7M (flat YoY, 11.2% margin)
• Income Tax: $11.8M (6.9% effective tax rate)
• Net Income: $157.9M (+147.5% YoY, 10.4% net margin)
• DKNG converts a significant portion of sales into profit due to its scalable platform and strong pricing power.

What Drives DKNG's Money Machine?

• Online Gaming & Sports Betting: 100% of revenue, reflecting DKNG’s dominance in digital wagering.
• Active User Growth: DKNG’s user base and engagement metrics continue to climb, fueling revenue expansion.
• Technology Investment: Strategic R&D in platform development and security ensures competitive differentiation.
• New Market Expansion: Ongoing entry into new states and international regions, though not yet profitable, positions DKNG for future growth.

Visualizing DKNG'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) taking the largest chunk.
• Even after significant investments in R&D and SG&A, 10.4% of revenue drops to the bottom line.

Key Takeaways

• DKNG's money comes overwhelmingly from online gaming and sports betting
• High gross and net margins illustrate the power of DKNG's scalable digital business model
• Heavy investment in technology and platform innovation, balanced by efficiency in operating costs
• Ongoing growth is driven by user engagement, market expansion, and product innovation

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FAQ About DKNG's Income Statement

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

DKNG generates over 100% of its revenue from online gaming and sports betting products. All revenue is reported under "Other Revenue by Product," reflecting its consolidated digital entertainment business.

2. How profitable is DKNG in Q2 2025?

DKNG reported net income of $157.9M in Q2 2025, with a net margin of approximately 10.4%, reflecting strong profitability driven by scalable operations and high user engagement.

3. What are the largest expense categories for DKNG?

The biggest expenses on DKNG's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached $108.4M in Q2 2025, as DKNG prioritizes platform innovation and security.

4. Why does [segment/division] operate at a loss?

DKNG does not report separate segment losses in Q2 2025; all revenue is consolidated. However, aggressive investment in technology and market expansion may lead to losses in new regions or product lines, as DKNG believes these will drive long-term growth—even if unprofitable today.

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

DKNG's effective tax rate in Q2 2025 was 6.9%, lower than previous years. This low rate is primarily due to tax benefits from share-based compensation and international structuring.