Domino’s Pizza reported fourth-quarter earnings on Monday that missed analyst expectations, yet traders who bet against the company on the prediction market Polymarket still profited from the outcome. The pizza chain delivered earnings per share of $5.35, falling short of the $5.38 consensus forecast that had been set by Wall Street analysts. According to pre-earnings data, 64% of Domino’s earnings event contracts on Polymarket were positioned for a beat, meaning those traders wagered the company would exceed expectations.
The miss represented a win for holders of “no” contracts on the prediction platform, which resolved in their favor when the actual GAAP earnings came in below the threshold of $5.39 per share. Despite the earnings shortfall, Domino’s stock rose following the announcement due to stronger-than-expected 2026 earnings guidance that exceeded Wall Street projections. The company’s forward outlook of above $19.54 per share helped offset disappointment over the fourth-quarter results.
Prediction Markets Emerge as Earnings Hedging Tool
The Domino’s earnings outcome highlights how prediction markets are expanding beyond their controversial reputation in sports wagering into new territory for professional investors. These platforms offer traders alternative ways to participate in corporate earnings events without directly owning shares or engaging in complex options strategies. Additionally, they provide hedging opportunities that may be less risky than traditional short-selling approaches.
Investors holding Domino’s stock could have purchased “no” contracts as insurance against disappointing results, effectively hedging their positions. Conversely, traders without existing positions could have bought “yes” contracts to gain exposure to potential earnings upside. However, this particular event demonstrated that even when prediction market sentiment leans heavily in one direction, actual results can differ significantly.
For bearish traders specifically, “no” contracts on earnings reports present a defined-risk alternative to shorting stocks outright. The maximum loss is limited to the contract purchase price, whereas short positions carry theoretically unlimited risk if shares rally. Meanwhile, successful “no” contract holders in the Domino’s case could have taken their winnings and purchased shares after the report to participate in the subsequent rally driven by optimistic guidance.
Mixed Analyst Sentiment on Pizza Chain
Wall Street remains divided on Domino’s prospects following the mixed quarterly results. Morgan Stanley recently downgraded the stock to equal weight from overweight and reduced its price target by 15%, citing challenging fundamental narratives facing the pizza delivery chain. The downgrade reflects concerns about competitive pressures and operational headwinds in the restaurant sector.
In contrast, some prominent institutional investors have demonstrated confidence in Domino’s future performance. Berkshire Hathaway increased its position in the pizza franchise during the fourth quarter of 2025, making it one of only four existing holdings the investment firm added to during that period. The divergence between analyst caution and institutional accumulation underscores the uncertainty surrounding Domino’s valuation and growth trajectory.
Industry observers suggest certain restaurant chains may benefit from lower payroll taxes and higher tip income among consumers. Nevertheless, the competitive landscape for pizza delivery and takeout remains intense, with multiple players vying for market share through promotions and digital ordering enhancements.
Market participants will likely monitor Domino’s execution on its 2026 guidance in coming quarters to determine whether the optimistic outlook proves achievable. The company has not announced a specific date for its first-quarter 2026 earnings report, though it typically follows a quarterly reporting schedule.
