CHDN — Q2 2026 Financial Report Analysis
Q2 · Fiscal year 2026 · Published by Pham Hop
A record Kentucky Derby Week lifted Churchill Downs Q2 revenue 4.9% to $980M and diluted EPS 14.4% to $3.42; outside the Derby, growth was low single digits.
- Revenue
- $980M
- +4.9% YoY
- Net income
- $241M
- +11.1% YoY
- Diluted EPS
- $3.42
- +14.4% YoY
- Operating margin
- 36.4%
This period vs a year ago
- Same period last year
- This period
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
A record Kentucky Derby drove most of Churchill Downs' growth this quarter
Churchill Downs' second quarter of 2026 always includes the Kentucky Derby, which runs on the first Saturday in May. That makes Q2 the company's biggest quarter: it produced 60% of first-half revenue. This year, management calls Derby Week "record-breaking." Net revenue rose 4.9% to $980 million. Net income attributable to the company rose 11.1% to $241 million, and diluted EPS rose 14.4% to $3.42. Most of the growth is traceable to the Derby. The year-round businesses — historical racing machines, casinos and online wagering — grew more slowly. There was one weak spot, in Central Virginia.
At a glance
- About $30 million of the $46 million revenue increase is Derby-linked. That is $21 million at Churchill Downs Racetrack itself (TV rights from NBC, tickets, sponsorship, on-track betting) plus $9 million more in online horse-race wagering, which the filing also credits to Derby Week.
- Adjusted EBITDA of $477 million, up 5.8%. This is management's main profit measure: earnings before interest, tax, depreciation and amortization, with one-off items removed. Its margin edged up to 48.7% from 48.3%.
- No share buybacks in 2026 so far. The company used its cash to cut debt by $360 million in the first half. A $600 million bond due April 1, 2027 is now listed as a current liability.
The numbers
| Metric | Q2 2026 | Q2 2025 | YoY Change |
|---|---|---|---|
| Net revenue | $980M | $934M | +4.9% |
| Operating income | $357M | $327M | +9.2% |
| Operating margin | 36.4% | 35.0% | +1.4 pts |
| Net income attributable to CDI | $241M | $217M | +11.1% |
| Diluted EPS | $3.42 | $2.99 | +14.4% |
| Adjusted EBITDA | $477M | $451M | +5.8% |
| Adjusted EBITDA margin | 48.7% | 48.3% | +0.4 pts |
| Diluted shares (weighted) | 70M | 72M | -2.8% |
Operating margin is the share of revenue left after running the business, before interest and tax.
Segment by segment
Segment figures below include sales between Churchill Downs' own units, so they add up to more than consolidated revenue.
| Segment | Revenue Q2 2026 | Revenue Q2 2025 | Change | Adj. EBITDA Q2 2026 | Adj. EBITDA Q2 2025 | Change |
|---|---|---|---|---|---|---|
| Live and Historical Racing | $575M | $541M | +6.3% | $318M | $297M | +7.1% |
| Wagering Services and Solutions | $178M | $168M | +6.0% | $52M | $48M | +8.3% |
| Gaming | $270M | $266M | +1.5% | $133M | $127M | +4.7% |
| All Other (corporate) | $2M | $2M | — | -$26M | -$21M | -$5M |
Live and Historical Racing (the Derby, other racetracks, and venues with historical racing machines, or HRMs) added $34 million of revenue. Of that, $21 million came from Churchill Downs Racetrack, $12 million from Kentucky HRM venues and $1 million from Virginia HRM venues. HRMs look and play much like slot machines, but each result is based on a past horse race, which makes them legal under racing law in states like Kentucky and Virginia. The racetrack added $16 million of the segment's $21 million Adjusted EBITDA gain; higher operating costs offset part of the Derby revenue. Kentucky HRMs added $6 million. Virginia was mixed. Northern Virginia venues added about $4–5 million, but Central Virginia lost $4 million of revenue and $5 million of Adjusted EBITDA, "primarily from increased competition." New Hampshire lost $2 million because the temporary Casino Salem venue was closed on purpose while the Rockingham Grand Casino is built.
Wagering Services and Solutions (formerly TwinSpires, the online and retail horse-betting business) gained $9 million of revenue from Derby Week wagering. Adjusted EBITDA rose $4 million.
Gaming (regional casinos) grew revenue 1.5%. The New York, Indiana and Maryland properties added $8 million. That was partly offset by a $4 million drop after Louisiana HRM operations shut in May 2025, following a court ruling against the state's 2021 HRM law. Joint-venture casinos added $4 million of Adjusted EBITDA: Rivers Des Plaines in Illinois and Miami Valley Gaming in Ohio.
All Other cost $5 million more, which the filing puts down to a prior-year reduction in corporate legal fees and claim development at the company's in-house insurance subsidiary.
What the headline numbers hide
- Without the Derby, growth was low single digits. If you remove the Derby-linked items the filing names, the rest of the business added roughly $7 million of Adjusted EBITDA on a base of about $450 million. That is $16 million at the racetrack and roughly $3 million from horse-racing wagering, out of the total $26 million gain. The Derby was a large contributor, but by its nature it happens once a year.
- Buybacks made EPS grow faster than profit. Net income rose 11.1% and EPS rose 14.4%. The gap comes from a weighted share count about 2 million lower than a year ago, all from buybacks in 2025 ($340 million in the first half of 2025). The company repurchased no shares under its program in the first half of 2026. $430 million of authorization remains.
- Few one-offs. Management estimates that, excluding a $2 million prior-year impairment and $4 million of lower transaction, pre-opening and other costs (both after tax), net income rose $18 million. Of that, $10 million came from operations, $4 million from higher income at joint ventures and $4 million from lower interest expense. Interest expense fell to $70 million from $75 million. The tax rate rose slightly, to 26.2% from 25.5%.
- Cash conversion is good, with one help. First-half operating cash flow was $512 million, against $325 million of net income. Deferred taxes added $42 million to that, compared with $4 million a year earlier. Subtracting $117 million of capital spending leaves roughly $395 million of free cash flow for the half. Most of it went to debt: total debt fell to $4.80 billion from $5.16 billion, mainly by paying down the revolving credit line.
- A refinancing is coming. The 5.5% notes due April 1, 2027 ($600 million) are now current. The filing says the company is "exploring options" to fund upcoming note maturities, including "raising funds via debt markets." The revolving credit line had $861 million available at June 30.
- A strategic review is mentioned only in passing. The forward-looking-statements section of this 10-Q now lists risks around "whether the objective of a strategic alternative review process will be achieved." The filing gives no further detail, so we don't speculate on what it involves.
Takeaway: This was a Derby quarter more than a broad-based one. A record Derby Week explains about two-thirds of the revenue gain and close to three-quarters of the Adjusted EBITDA gain. Kentucky HRMs kept growing, and that is the steadier engine. Central Virginia competition and the Louisiana shutdown are the drags to watch now that the Derby has passed. Note too that EPS growth this year is being helped by 2025's buybacks, not 2026's: cash is going to debt reduction, with a $600 million bond due in April 2027.
Outlook
The 10-Q's only numeric forward figure is capital spending on projects: "approximately $180 to $220 million in 2026," mainly Rockingham Grand Casino in New Hampshire and Victory Run at Churchill Downs Racetrack. With $79 million spent in the first half, that implies roughly $100–140 million more in the second half. Q3 has no Derby, so the comparison will rest on the HRM venues and casinos. That makes it a cleaner test of whether Central Virginia's losses to competition are spreading or holding steady. The other things to watch are how the 2027 notes get refinanced and whether buybacks resume. Churchill Downs has said it will report third-quarter results after the market close on October 28, 2026.