DraftKings layoffs affect 3.5% of employees as the company cuts costs

Posted on: Feb 1, 2023 1:37 am.

Last updated on: February 1st, 2023, 03:46 am.

DraftKings (NASDAQ:DKNG) announced Wednesday that it is laying off 140 employees, or about 3.5% of its workforce, to cut costs.

DraftKings layoffs
Jason Robins, CEO and co-founder of DraftKings, see above. The company is laying off 3.5% of its workforce to cut costs. (Picture: CNBC)

The Boston-based sportsbook has not specified in which areas these job cuts will take place. Nor did it mention the possibility of pay cuts related to layoffs.

With an increased focus on operational efficiency, we are constantly evaluating our teams to ensure they are best positioned to achieve our corporate goals in 2023 and beyond,” said a spokesman for DraftKings Alpha wanted. “We have decided to reorganize some teams, eliminating around 140 roles.”

The gaming company did not disclose which locations it was cutting jobs at. In addition to its Boston headquarters, DraftKings has an office in Las Vegas but does not take bets in Nevada.

DraftKings’ layoffs come at an interesting time

News of DraftKing’s downsizing comes as the domestic sporting calendar enters one of its busiest periods, indicating the operator sees value in downsizing its workforce sooner rather than later.

The Super Bowl – the biggest wagering event in the US – is less than two weeks away and the NCAA tournament, also known as March Madness, is just around the corner. And there’s still plenty of college basketball, NBA and NHL regular season action for bettors to look forward to.

DraftKings’ announcement of headcount reductions comes ahead of the company’s fourth-quarter earnings report on February 16, during which the operator could provide updated guidance for 2023. It’s widely believed that the sports betting company will turn profitable sometime this year, and some analysts say the layoffs signal management’s increased focus on cutting costs and profitability.

In a note to clients today, Piper Sandler analyst Matt Farrell said the layoffs could prove positive amid investors demanding profitability from DraftKings. He adds that when it comes to downsizing, signal management also prioritizes profitability. Farrell rates DraftKings as “overweight” with a price target of $15.

Interesting timing part II

The DraftKings layoff announcement not only comes ahead of a busy stretch of sports betting facilities, but also comes as a number of US companies announce similar moves. FedEx (NYSE: FDX) said earlier today that it will cut its team of officers and directors by more than 10% in a sign the US economy could be in weak territory.

Electric vehicle maker Rivian Automotive (NASDAQ:RIVN) announced it is cutting its workforce by 6%, or 840 jobs. On Tuesday, PayPal (NASDAQ:PYPL) announced it was cutting 2,200 jobs. Recently, tech giants including Google parent Alphabet (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Facebook parent Meta Platforms (NASDAQ:META), and Microsoft (NASDAQ:MSFT), among others, announced large-scale layoffs.

The gaming industry hasn’t been immune to the trend, and DraftKings isn’t the first offender. Last month, Bally’s Corp. (NYSE: BALY) announced that it will lay off up to 15% of the staff in its digital games division in order to make this business profitable.