Churchill Downs: The Derby Is Just the Beginning
In a game of word association, Churchill Downs and Kentucky Derby are a common match. But for investors, it’s worth your time to get familiar with Churchill Downs Inc. (NASDAQ: CHDN), the parent company that operates the racetrack that hosts the Kentucky Derby. It’s much more than an event-driven company and has a lot of growth to come.
That growth was evident in the company’s Q1 2026 earnings report. The company delivered records on the top and bottom lines.
Revenue of $663 million beat estimates for $659.32 million and came in 3% higher than the $642.6 million the company posted in Q1 2025, a quarter, by the way, in which it came in below estimates. Earnings per share (EPS) of $1.21 came in 18 cents better than the forecast and 14 cents higher year-over-year (YOY).
The Real Reason to Bet on Churchill Downs
Historically, the second quarter has been Churchill Downs’ strongest quarter, and with good reason. That’s the quarter in which the Kentucky Derby is run. The rest of the year, revenue from Churchill Downs Racetrack doesn’t amount to much. For example, this quarter it accounted for $3 million , a YOY decline of $1 million.
That’s why the event, as iconic as it is, is a poor reason to invest in CHDN. The right reason is the company’s leadership position in Historical Racing Machines (HRM). These are essentially slot-machine style terminals that allow players to bet on outcomes of previously run horse races. However, the historical data is stripped away, so the result feels like live gambling.
That may sound strange, but there’s a method to the madness. These HRMs are legally classified as a form of pari-mutuel horse racing wagering, not casino gambling. That means they can operate in states where traditional casinos are illegal.
In the quarter, segment revenue came in at $301 million, a $24 million increase YOY, almost completely driven by HRM. Expansion is a significant part of the growth story:
Marshall Yards Racing & Gaming in Southwestern Kentucky opened Feb. 25, 2026.
Rockingham Grand Casino in Salem, New Hampshire, announced Jan. 12, is a $180–$200M investment targeting mid-2027 opening.
The company is spending $70M–80M of its 2026 CapEx budget on Rockingham alone.
Churchill Downs Expands Its Racing Empire With Preakness Deal
The Kentucky Derby is the first, and arguably the most iconic, leg in horse racing’s Triple Crown. That trio of events includes the Preakness Stakes and the Belmont Stakes.
That’s why investors should note that on April 21, two days before the earnings report, Churchill Downs announced that it agreed to purchase the intellectual property of both the Preakness Stakes and Black-Eyed Susan Stakes for $85 million.
This means Churchill Downs will hold all the trademarks and associated rights of the Preakness Stakes without having to run the event or own Pimlico, the host racetrack. Instead, it collects an annual licensing fee from the state of Maryland and has leverage over future broadcast rights, negotiations, calendar reform, potential HRM licensing and the cultural narrative of American thoroughbred racing.
And it does so for less than one quarter of its current free cash flow (FCF). That wasn’t priced into CHDN before earnings.
CHDN Stock Outlook: Can HRM Growth Drive the Next Leg Higher?
CHDN jumped more than 10% the day of its earnings report. Prior to the report, the stock was trading close to its 52-week low. That means investors have probably seen the floor—but what’s the ceiling?
Analysts give CHDN a consensus price target of $135.60, an upside of 35%. With that much upside, it’s fair to wonder if the Preakness IP rights are enough to move the price targets higher.
Churchill Downs operates across four revenue streams: Live Racing, Historical Racing Machines, its TwinSpires wagering platform, and traditional casino Gaming. Of these, Live Racing and Gaming don't move the needle enough to build a growth case—casino revenue actually declined year over year in Q1, weighed down by the exit from Louisiana. TwinSpires, which handles online and retail horse racing wagering plus sports betting, is a steady contributor but not a high-growth engine.
That puts the real growth burden on HRMs—a business that delivered $257 million in pari-mutuel revenue in Q1 alone and is actively expanding into new states. The Preakness IP acquisition adds an intriguing wrinkle: if it accelerates HRM legalization in Maryland, as some analysts expect, CDI's most important growth driver just got a new runway.
Going back to the chart. CHDN was in a cautious recovery after a steep selloff from a December 2025 peak around $120. That caused a death cross with the 50-day simple moving average (SMA) crossing below the 200-day SMA.
Price action reclaimed the 200-day SMA the day of the report, which is a significant move in a single session, especially when investors got a fundamental catalyst. The key will be if CHDN can consolidate at the 200-day SMA around $92 and $93. That could set the stage for a golden cross in a matter of weeks. Waiting for that confirmation may be more prudent, but risk-tolerant investors may want to initiate a position at these levels.
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