During last week's earnings call, Flutter CEO Peter Jackson faced numerous questions from analysts focused on the company's outlook for its prediction market division. This sector, which is rapidly gaining traction, is forecasted to surpass $1 trillion in annual revenue by 2030. The swift growth is particularly noteworthy as event contracts tied to sports, which represent the majority of prediction market activity, were still in their infancy just a year ago.
With less than three months since the debut of FanDuel Predicts, Jackson addressed concerns about potential cannibalization during the quarterly update. He assured analysts, "As you'd expect, we've undertaken a comprehensive review and found no evidence of material cannibalization on our existing business. The opportunity across prediction markets is certainly far bigger than any potential cannibalization of existing sports.”
Despite his optimistic remarks, the stock market reacted negatively, with Flutter experiencing its biggest sell-off in sports betting stocks in four years. Following the earnings call, Flutter's stock dropped by as much as 15%, reaching its lowest price since May 2022. Over the past year, the company's value has plummeted approximately 54%, a decline that has accelerated as major competitors like DraftKings have entered the prediction market sector.
Both Flutter and DraftKings are currently trading near four-year lows, with Flutter nearing the $96 per share mark seen in May 2022 during global inflation concerns. The company's stock closed on Friday at $106.14, reflecting a session decline of 13.8%. Flutter’s share price has dropped 36.8% throughout February, mirroring the wider industry's decline. A year ago, its shares were priced at $309, marking its peak since the company's public debut on the New York Stock Exchange in 2024.
The challenges faced by Flutter reflect similar difficulties at DraftKings, which is also struggling due to the rise of event contracts. Despite these setbacks, both firms plan to significantly invest in prediction markets this year.
Analysts from around the globe directed numerous questions towards Jackson regarding Flutter's ambition to expand its prediction market presence. At least seven analysts focused on this topic during the call. Jackson aligned his views with DraftKings CEO Jason Robins, who recently described prediction markets as the most promising growth opportunity for the sports betting sector since the landmark PASPA decision in 2018. Jackson echoed this sentiment, labeling prediction markets as the “most valuable long-term opportunity” for the US sports wagering landscape and highlighted the potential for substantial upside.
He further emphasized Flutter's ability to capitalize on cross-sell opportunities between FanDuel Predicts and other areas like sports betting and iGaming. In response to John DeCree of CBRE Securities, who inquired whether prediction markets might accelerate legalizations in non-gaming states, Jackson stated, "We believe the noise around prediction markets, it is an opportunity for us to acquire customers in advance of the states regulating. We do think it will help hasten the regulation of iGaming and online sports betting.”
For fiscal year 2026, Flutter projects an investment of at least $250 million into the growth of FanDuel Predicts, which could potentially increase if returns exceed expectations, according to Chief Financial Officer Rob Coldrake. Analyst Barry Jonas from Truist Securities noted that spending could range between $250 million and $300 million, particularly concentrated in the latter half of the year.
In addition, Jonas mentioned that Flutter is exploring ways to utilize its proprietary pricing capabilities within the prediction market space. However, unlike DraftKings, Flutter has not committed to launching its own market-making service but is considering this option.
DraftKings has made clear its intentions to introduce a market-making service expected to generate substantial annual revenue from trading fees.
Lingering concerns continue to surface. Flutter is targeting revenues of $18.4 billion by 2026, leading to adjusted EBITDA of $2.97 billion, estimates that fall significantly below Wall Street’s projections for that year.
The shift towards prediction markets has raised questions about possible declines in customer engagement on the sportsbook side. Last quarter, FanDuel reported a modest 3% year-over-year growth in handle, which fell short of expectations. The company attributed the lackluster performance to unusual outcomes in the NFL season, particularly citing the playoff absence of teams like the Kansas City Chiefs, Baltimore Ravens, and Cincinnati Bengals, which limited parlay opportunities for bettors.
Other analysts have expressed views on the implications of prediction markets for Flutter's revenue outlook. Citizens analyst Jordan Bender expressed that uncertainties surrounding growth may hinder the company’s revenue forecasting. While he remains skeptical about upside potential from prediction markets, he noted that Flutter likely accounted for some cushion in their guidance.
Conversely, Macquarie analyst Chad Beynon believes that the market reaction concerning predictions is exaggerated, given Flutter's position as a leading player in US sports betting. He projects compounded annual growth rates for Flutter’s revenue and adjusted EBITDA over the next two years at 10% and 21%, respectively.
For nearly a decade, FanDuel and DraftKings have dominated the US online sports betting market, consistently capturing a combined market share exceeding 70%. However, the intensifying competition in the prediction market space raises doubts about the viability of this duopoly going forward.
