Racing, gaming, and entertainment company Churchill Downs (NASDAQ: CHDN) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 4.9% year on year to $934.4 million. Its non-GAAP profit of $3.10 per share was 2.9% above analysts’ consensus estimates.

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StockStory’s Take

Churchill Downs’ second quarter results surpassed Wall Street’s expectations, with management attributing the outperformance to strong demand for the Kentucky Derby and continued momentum in the company’s Historical Racing Machine (HRM) operations. CEO Bill Carstanjen emphasized that ticketing strategies, increased premium experiences, and enhanced media exposure were central to driving higher attendance and wagering. He pointed to the expansion of Derby Week, saying, “We will continue to deliver special customer experiences while selectively and thoughtfully pricing them based on rising customer demand, especially for our premium offerings.”

Looking ahead, Churchill Downs is focused on driving step-function growth in 2026, underpinned by new broadcast agreements, further enhancements to Derby Week experiences, and strategic capital investments in HRM facilities. Management expects the prime-time broadcast of the Kentucky Oaks and new sponsorship opportunities to anchor future gains. Carstanjen stated, “Positioning the Oaks in prime time also creates a compelling lead-in to the Kentucky Derby, further amplifying awareness, engagement and wagering around our flagship event.” Expansion into new gaming markets, such as New Hampshire, and ongoing renovations at Churchill Downs Racetrack are expected to further support revenue and margin growth.

Key Insights from Management’s Remarks

Management highlighted that Derby Week expansion, rising HRM contributions, and new capital investments were the primary drivers of the company’s quarterly performance.

• Derby Week premium experiences: The company’s strategy of broadening Derby Week with themed days and unique premium offerings led to higher attendance and stronger customer segmentation. Over 370,000 people attended, comparable to hosting several major sporting events within one week.
• Media and sponsorship growth: A new long-term contract with NBC will increase broadcast exposure of both the Kentucky Derby and Kentucky Oaks, with Oaks moving to prime-time national coverage in 2026. Management expects this to drive further sponsorship and wagering gains.
• Wagering momentum: Churchill Downs set new records for Derby Week wagering, with an 11% increase on the Derby race itself and growth across digital platforms such as TwinSpires. Partnerships with companies like FanDuel and DraftKings contributed to these results.
• HRM facility ramp and expansion: HRM venues in Kentucky and Virginia, especially new locations like Owensboro and The Rose, delivered meaningful adjusted EBITDA growth. Management described these markets as still early in their growth cycle, with strong consumer trends and ongoing investment in customer acquisition.
• Strategic capital projects: Continued investment in venue upgrades, including the completion of the Starting Gate Pavilion and ongoing renovations of Finish Line Suites and The Mansion, are expected to enhance customer experience and support long-term revenue gains. The company is also advancing new projects in New Hampshire and Kansas.

Drivers of Future Performance

Management’s guidance focuses on continued growth from expanded Derby Week offerings, broadcast enhancements, and HRM market development, but notes that capital investments and new market entries will shape both opportunity and risk.

• Derby Week expansion and pricing: Management expects that strategic ticket pricing and new premium experiences, combined with expanded media coverage, will drive meaningful adjusted EBITDA growth for Derby Week in 2026 and beyond. The move of the Kentucky Oaks to prime time is anticipated to boost sponsorship and wagering.
• HRM market development: The company is investing in new and existing HRM facilities in Kentucky, Virginia, and New Hampshire. Management believes the early stages of market penetration offer significant runway, but acknowledges that ramp-up periods can vary and require sustained marketing and operational investment.
• Regulatory and tax environment: Favorable changes in federal tax law, including permanent bonus depreciation and expanded interest deductibility, are expected to increase free cash flow in 2025 and 2026. However, management notes that execution on new projects and navigating local regulatory approvals remain ongoing challenges.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the impact of prime-time Kentucky Oaks coverage and related sponsorship growth, (2) the ramp and customer acquisition at new and expanded HRM properties in Kentucky, Virginia, and New Hampshire, and (3) progress on capital projects at Churchill Downs Racetrack. Developments in regulatory approvals and execution of new gaming market entries will also be closely watched.

Churchill Downs currently trades at $114.01, up from $109.20 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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