I get it: When all was said and done, DraftKings' (DKNG 2.91%) second-quarter earnings fell just short of estimates. Even if only by a penny, in this market environment, anything less than perfection is punishable.
That's why its shares are down since last Wednesday's release of the company's second-quarter numbers. Investors briefly tested post-earnings gains, but ultimately decided there was more risk than reward.
The market may not be seeing the full picture for this online sports betting site, though. After DraftKings' second-quarter report, there are four reasons I'm even more excited about this stock's long-term upside than I was before, which I will get into below.
A strong quarter
The second-quarter numbers were actually pretty good. DraftKings turned a record-breaking $1.51 billion in revenue into two other record-breaking figures: adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $301 million and net income of $158 million -- or $0.38 per share -- versus a year-ago comparison of $1.1 billion in sales and bottom line of $0.22 per share.
The company also broke a few records with this latest quarter's results. Total customer headcount and average revenue per user (ARPU) ticked higher for the three-month stretch. And its full-year sales and EBITDA forecasts still call for healthy growth, unchanged from the first quarter's outlook.
Image source: Getty Images.
The only problem: Analysts were looking for a per-share profit of $0.39. The one-cent miss didn't initially bother investors, who gladly celebrated the sizable beat of revenue estimates of $1.42 billion. Over time, however, the market has increasingly changed its mind; weakness from shares of rival FanDuel parent Flutter Entertainment around this same time helped sway investors.
Anyone interested in buying DraftKings stock might want to count themselves lucky, though. Last quarter's report could have just as easily been interpreted in a bullish light, rekindling a rally seen in June. There's every reason to believe this ticker has plenty of upside left despite having gone nowhere since early 2024.
Four reasons I'm bullish on DraftKings
Most investors understand that when you buy a stock for the long haul, you're actually buying into a business (and even a business premise) rather than buying a bunch of numbers. It's numbers, on the other hand, that prove a company's operation is strategically sound.
To this end, there are four quantifiable highlights to draw from DraftKings' second-quarter report and conference call.
1. Growth remains ridiculously strong
If it were just last quarter's top-line growth of 37%, it might be dismissed as a fluke. There was nothing fluky about it, though. This is the sort of growth the company has been producing for years and is expected to continue to do for at least a few more. Ditto for earnings.
Data source: StockAnalysis.com. Chart by author.
2. Its sports book's profit margins are widening
And its growing profitability can't be overemphasized. All too often, a company's growth becomes more difficult and more expensive to muster the bigger the organization gets. All the low-hanging fruit is picked first.
Not with DraftKings, though. As it adds scale, net margins on its sports book revenue (which make up about two-thirds of its business) continue to widen, suggesting it's becoming more efficient the bigger it gets.
Image source: DraftKings' second-quarter earnings call.
This is always the goal of any company, but not everyone can produce wider profit margins as it expands.
3. The balance sheet is healthy
For many high-growth companies, major problems are often evident on their balance sheet before they manifest themselves anywhere else. Too much debt, not enough cash, an ever-growing number of shares diluting existing shareholders: It's all quietly hiding in plain sight on these accounting statements.
DraftKings doesn't have any such ticking time bombs on the books, though. It has nearly $1.3 billion in the bank versus less than $800 million as of the end of last year. And, while this $22 billion company added roughly $200 million more in long-term liabilities in 2024, it also managed to create $300 million less in short-term obligations.
The point is, there are no capitalization problems right now that are going to come back to haunt investors.
4. The growing online sports betting market is still only half-tapped
As much as DraftKings has grown since evolving from a fantasy sports platform to an online sports-betting service in 2018 (and adding online casino gambling shortly thereafter), there's still tons of room for more growth. The company noted in its second-quarter report that only half the country's population currently has legal access to its online sports book, while only about a tenth of the nation can play its online casino games.
The rest are coming around, though. Numbers from Legal Sports Report, an industry monitor, indicate that only 38 states currently allow sports betting of any sort, and only 30 of those allow it online. And of the ones that do, many of them still have prohibitive rules. But all of this is changing, slowly but surely.
In the meantime, more consumer education and further penetration of existing markets can continue fueling DraftKings' growth.
Ditto for the 43 states that don't yet allow online casino gambling (according to BettingUSA.com). More and more states are entertaining the idea, eyeing the tax revenue it generates.
The researcher Optima Insights believes the country's online sports betting business will grow from last year's $35 billion to $58 billion in 2033, while Mordor Intelligence expects North America's entire online gambling market to grow at an even-faster annualized pace of nearly 12% through 2030. DraftKings is well-positioned to win at least its fair share of this growth.
5. The kicker: Analysts like the stock
And there's a fifth bonus reason to be bullish on DraftKings stock that doesn't directly have anything to do with the company's efforts, or the sports-betting or i-gaming industries. And that's analysts' opinion of it.
While investors aren't exactly stoked right now, the vast majority of the analyst community currently rates DraftKings stock as a strong buy, with a consensus target of $55.08, more than 27% above the present price. That's not a bad tailwind to start out a new trade with.
Much more to like than not
No company or investment prospect is perfect, and DraftKings is no exception. For instance, even though no analysts or investors said it outright, I suspect several of them balked at the fact that it didn't actually add any new monthly users between the first and second quarters. Although the betting business can be seasonal, it's never been seasonal enough to stymie the company's progress on its customer count.
Image source: DraftKings' Q2-2025 earnings conference call slide deck.
I'm not going to read too much into this slowdown, however, given that average per-user revenue as well as total revenue still grew quite a bit once again.
More than anything, I'm going to tout the bigger bullish picture that most investors seem to have lost sight of here. This company is doing everything that could reasonably be expected of it, and it's doing it in an industry with plenty of growth on the horizon. There's no need to make it any more complicated than that.
Just bear in mind that it will take a long-term mindset to stick with this stock. The near term remains unpredictable.
