DraftKings cut its outlook to reflect the climbing costs of growing its prediction markets business.

The sports-betting company said it now expects full-year 2026 revenue to be $6.35 billion to $6.55 billion for the year, down from its previous guidance of $6.5 billion to $6.9 billion.

It also slashed its outlook for adjusted earnings before interest, taxes, depreciation and amortization, which it now expects to be $175 million to $275 million for the year. That is down from its prior range of $700 million to $900 million.

Shares dropped 20% to $18.77 in after-hours trading.

DraftKings said the lower outlook reflected a $650 million to $700 million investment in its prediction markets offering, which launched late last year.

Prediction markets revenue will be immaterial this year, as new customer promotions are offsetting most of gross revenue generated, DraftKings said. The company plans to invest $175 million to $225 million into the predictions business during the current fourth quarter.

DraftKings also issued an outlook for fiscal 2027, expecting revenue of $7.35 billion to $7.75 billion, compared with the $7.61 billion analysts project. Prediction markets are expected to contribute $650 million to $750 million in sales.

In the third quarter, DraftKings had a loss of $468.7 million, or 94 cents a share, compared with a loss of $256.8 million, or 52 cents a share, a year earlier. That was wider than analysts' forecast of a 41-cent loss.

Revenue rose 16% to $1.33 billion, also falling short of Wall Street's estimate of $1.39 billion.

DraftKings is spending heavily on the prediction markets offering to try to stay competitive with new market entrants, such as Kalshi and Polymarket. Rival Flutter, which operates Fanduel, said earlier this week that the increase in marketing from prediction markets operators had driven up advertising costs.