Racing, gaming, and entertainment company Churchill Downs (NASDAQ: CHDN) met Wall Street’s revenue expectations in Q2 CY2026, with sales up 4.9% year on year to $980 million. Its non-GAAP profit of $3.45 per share was in line with analysts’ consensus estimates.
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Churchill Downs (CHDN) Q2 CY2026 Highlights:
- Revenue: $980 million vs analyst estimates of $979.1 million (4.9% year-on-year growth, in line)
- Adjusted EPS: $3.45 vs analyst expectations of $3.43 (in line)
- Adjusted EBITDA: $477 million vs analyst estimates of $473 million (48.7% margin, 0.9% beat)
- Operating Margin: 36.4%, up from 35.1% in the same quarter last year
- Free Cash Flow Margin: 16.2%, similar to the same quarter last year
- Market Capitalization: $6.22 billion
Company Overview
Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Churchill Downs grew its sales at a 15.5% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the consumer discretionary sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Churchill Downs’s recent performance shows its demand has slowed as its annualized revenue growth of 7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Churchill Downs also breaks out the revenue for its three most important segments: Horse Racing, Gaming, and TwinSpires, which are 55.4%, 27.6%, and 17% of revenue. Over the last two years, Churchill Downs’s Horse Racing (live and historical) and Gaming (casino games) revenues averaged year-on-year growth of 11.5% and 2.6% while its TwinSpires revenue (horse racing subsidiary) averaged 9.5% declines. 
This quarter, Churchill Downs grew its revenue by 4.9% year on year, and its $980 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and implies its products and services will face some demand challenges.
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Operating Margin
Churchill Downs’s operating margin has shrunk over the last 12 months and averaged 24.7% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.
In Q2, Churchill Downs generated an operating margin profit margin of 36.4%, up 1.4 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.
Churchill Downs’s EPS grew at 20.3% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 15.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
In Q2, Churchill Downs reported adjusted EPS of $3.45, up from $3.10 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Churchill Downs’s full-year EPS to grow 6.5% from $6.72 to $7.16.
Key Takeaways from Churchill Downs’s Q2 Results
We struggled to find many positives in these results. Zooming out, we think this was a mixed quarter. The stock remained flat at $88.05 immediately after reporting.
Big picture, is Churchill Downs a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
