Racing, gaming, and entertainment company Churchill Downs (NASDAQ: CHDN) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 6.7% year on year to $665.9 million. Its non-GAAP profit of $0.97 per share was 5.4% below analysts’ consensus estimates.
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Churchill Downs (CHDN) Q4 CY2025 Highlights:
- Revenue: $665.9 million vs analyst estimates of $661.4 million (6.7% year-on-year growth, 0.7% beat)
- Adjusted EPS: $0.97 vs analyst expectations of $1.03 (5.4% miss)
- Adjusted EBITDA: $247 million vs analyst estimates of $245.8 million (37.1% margin, in line)
- Operating Margin: 18.5%, down from 20.3% in the same quarter last year
- Free Cash Flow Margin: 17.4%, up from 0.2% in the same quarter last year
- Market Capitalization: $6.71 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
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Churchill Downs grew its sales at a 22.7% 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 9% 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 46.9%, 37.3%, and 15.8% 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 12.5% and 3.7% while its TwinSpires revenue (horse racing subsidiary) averaged 18.3% declines. 
This quarter, Churchill Downs reported year-on-year revenue growth of 6.7%, and its $665.9 million of revenue exceeded Wall Street’s estimates by 0.7%.
Looking ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Operating Margin
Churchill Downs’s operating margin has been trending down over the last 12 months and averaged 24.6% 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.
This quarter, Churchill Downs generated an operating margin profit margin of 18.5%, down 1.8 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
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Churchill Downs’s EPS grew at an astounding 69.1% compounded annual growth rate over the last five years, higher than its 22.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q4, Churchill Downs reported adjusted EPS of $0.97, up from $0.92 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Churchill Downs’s full-year EPS of $6.23 to grow 8.6%.
Key Takeaways from Churchill Downs’s Q4 Results
We struggled to find many positives in these results. Overall, this quarter could have been better. The stock traded down 2.8% to $93.45 immediately following the results.
Churchill Downs may have had a tough quarter, but does that actually create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
