DraftKings reported dismal third-quarter earnings after the market closed Thursday, but saw enough strength in its predictions market to go full-steam ahead on the offering.

Its stock plummeted after the results, as the company's cut to its 2026 outlook overshadowed revenue gains in its sports betting and iGaming businesses.

The company reported a loss of 94 cents a share on revenue of $1.33 billion. Wall Street analysts surveyed by FactSet expected a loss of 41 cents a share on revenue of $1.39 billion.

Last quarter, DraftKings maintained its full-year revenue guidance at $6.7 billion; Thursday, it lowered that number to $6.45 billion. The revision is because of increased investment in the firm's prediction market, which was a major focus of CEO Jason Robins' letter to shareholders.

New-customer sign-ups have surged, up 13% year-over-year in the quarter.

"In just a few months, we have become the clear number three Predictions exchange by Total Volume," he wrote.

(Kalshi and Polymarket are number one and two, respectively. Polymarket has a data sharing partnership with Dow Jones, the publisher of Barron's.)

Robins said DraftKings expects to rake in $700 million in prediction market revenue next year. However, he added that "predictions revenue will be immaterial in fiscal year 2026, as new customer promotions will offset the lion's share of gross revenue generated."

Investors seem impatient: DraftKings shares dived 22% in after-hours trading.

DraftKings' prediction market strategy has differed from that of its closest competitor, Flutter, the parent-company of FanDuel that also reported disappointing results this week. DraftKings has kept its entire prediction market operation in-house. It writes its own event contracts and owns the exchange they're traded on; Flutter uses Crypto.com's contracts.

The regulatory outlook for prediction markets is cloudy, with the Supreme Court being asked to review a dispute over regulatory oversight of sports event contracts. But DraftKings could be positioned to benefit under different legal outcomes.

"If sports event contracts are eventually prohibited, we would expect the traditional sportsbook business to flourish once again, with the company able to make money from non-sports event contracts as well given its expanding infrastructure," Freedom Capital Markets analyst Nick McKay wrote in a research note this week. Robins noted Thursday that non-sports predictions have been a major growth driver, especially those connected to the performance of cryptocurrencies. If sports event contracts remain permitted, DraftKings Predictions is in a solid position to continue the growth it's seeing.

As prediction markets become a larger focus for the firm, DraftKings' core business of traditional online sports betting remains strong: Net sportsbook revenue was up 36% year over year.

Another area of growth investors should note is iGaming -- casino-style games on mobile devices -- which saw revenue increase 7% from a year earlier. DraftKings mobile sports betting is available in 29 states, while iGaming is only available in five; nevertheless, iGaming generated 35% of DraftKings' quarterly revenue.

Despite increased investments in prediction markets and broader sector headwinds, DraftKings remains in a solid position. Robins wrote in his closing words to shareholders: "We have never had more ways to win."