Racing, gaming, and entertainment company Churchill Downs (NASDAQ: CHDN) reported Q2 CY2025 results topping 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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Churchill Downs (CHDN) Q2 CY2025 Highlights:
- Revenue: $934.4 million vs analyst estimates of $921.6 million (4.9% year-on-year growth, 1.4% beat)
- Adjusted EPS: $3.10 vs analyst estimates of $3.01 (2.9% beat)
- Adjusted EBITDA: $450.9 million vs analyst estimates of $439 million (48.3% margin, 2.7% beat)
- Operating Margin: 35.1%, down from 37% in the same quarter last year
- Free Cash Flow Margin: 16.6%, up from 9% in the same quarter last year
- Market Capitalization: $7.81 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
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Churchill Downs’s 22.5% annualized revenue growth over the last five years was impressive. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Churchill Downs’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 13.6% over the last two years was well below its five-year trend. 
We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Horse Racing, Gaming, and TwinSpires, which are 54.6%, 28.5%, and 17% of revenue. Over the last two years, Churchill Downs’s revenues in all three segments increased. Its Horse Racing revenue (live and historical) averaged year-on-year growth of 31.8% while its Gaming (casino games) and TwinSpires (horse racing subsidiary) revenues averaged 9.8% and 5%.
This quarter, Churchill Downs reported modest year-on-year revenue growth of 4.9% but beat Wall Street’s estimates by 1.4%.
Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Churchill Downs’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 25.5% over the last two years. This profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.
This quarter, Churchill Downs generated an operating margin profit margin of 35.1%, down 2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.
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 an astounding 90% compounded annual growth rate over the last five years, higher than its 22.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q2, Churchill Downs reported EPS at $3.10, up from $2.89 in the same quarter last year. This print beat analysts’ estimates by 2.9%. Over the next 12 months, Wall Street expects Churchill Downs’s full-year EPS of $6.06 to grow 10.8%.
Key Takeaways from Churchill Downs’s Q2 Results
It was good to see Churchill Downs narrowly top analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2% to $111.34 immediately after reporting.
Is Churchill Downs an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
