In 2025, Louisville's first Saturday in May generated an estimated $441 million in local economic activity, according to Louisville Tourism. Hotel occupancy exceeded 90 percent. The Derby broadcast drew 17.7 million viewers on NBC and Peacock, the largest audience since 1989, with a peak of 21.8 million. Churchill Downs Incorporated told investors the broadcast reached more viewers than the Indy 500, the Daytona 500, and the Formula 1 Miami Grand Prix combined.
By every metric designed to measure a spectacle, the Kentucky Derby is thriving.
The question worth sitting with, the week of the 152nd running, is what exactly is thriving, and what it depends on.
Churchill Downs Incorporated reported $2.93 billion in revenue for 2025, a seven percent increase over 2024, and net income of $383 million. The company has now posted five consecutive years of record revenue. Its own website headline reads: "The Kentucky Derby is just the beginning."
That turns out to be literally true, just not in the way it sounds.
The Live and Historical Racing segment generated $1.44 billion in 2025. Of the $175.4 million in growth that segment produced year over year, Churchill Downs Racetrack itself contributed $8.4 million. When measured by adjusted EBITDA, the racetrack contributed $0.7 million of the $62.4 million the segment added. The machines accounted for the rest.
The investment strategy reflects this. Over the past two decades, CDI has spent approximately $700 million on capital improvements at Churchill Downs, concentrated in luxury hospitality suites, premium event spaces, and renovated entrances. A $300 million grandstand renovation is planned for completion in 2028. And during Derby Week, CDI generates twice as much revenue from event ticketing as it does from wagering on the races, according to the company's December 2025 investor presentation.
"The horse is still the product. The hospitality and the machines are the business."
Before going further, this term deserves a proper explanation, because it is doing a lot of work in this story.
A Historical Racing Machine, or HRM, is an electronic terminal installed at a licensed racetrack or satellite facility. You sit down at what looks exactly like a casino slot machine, insert money, and bet on a horse race. The difference from a slot machine is technical and legally significant: the race you are betting on actually happened. The machine pulls from a database of thousands of real past races, strips out the horses' names and identifying details, and shows you a brief window of anonymized statistics before you place your wager. You have no idea which race you are watching or what year it was run.
In terms of the experience: you press a button, watch a short animation, and find out if you won. The gameplay is indistinguishable from a slot machine.
The legal distinction is what makes them possible. HRMs are classified as pari-mutuel wagering on horse racing, meaning they fall under state racing commission oversight rather than gaming board jurisdiction. Pari-mutuel is the system horse racing has used for over a century: all bets on a race are pooled together, the track takes a commission off the top, and the remainder is divided among winning tickets. Because HRMs technically fit that definition, they can operate at racetracks in states where obtaining a full casino gaming license would be politically or financially out of reach.
Kentucky codified this in 2021 through Senate Bill 120, which formally defined HHR (Historical Horse Racing) as a form of pari-mutuel wagering. The same law established that a portion of HRM tax revenue would flow into the Kentucky Thoroughbred Development Fund and supplemental purse accounts, giving the sport a direct financial stake in the machines' growth.
CDI has built its growth strategy around this product. The company now operates an average of 5,000 HRMs across eight locations in both Kentucky and Virginia. In 2025, those machines generated the overwhelming majority of the company's revenue growth, accounting for $160.9 million of the $175.4 million increase in CDI's Live and Historical Racing segment.
Churchill Downs Racetrack runs approximately 80 live race days per year. Set aside the two weeks around the Derby and the Kentucky Oaks, and the revenue those race days generate is marginal by the standards of a $2.93 billion enterprise. CDI's quarterly earnings releases show the same pattern, quarter after quarter: HRM venues up by tens of millions, Churchill Downs Racetrack contributing a single-digit increment to the total.
This is not an indictment of CDI's business strategy. It is a structural observation. The company has built what works. The machines work. The luxury hospitality experience works. The brand of the Derby, 151 years old, still capable of drawing 147,000 people to a single venue and 17.7 million to television screens, works extraordinarily well.
The question is what that brand depends on for its raw material.
The horses that run in the Kentucky Derby are produced by an industry that is contracting at every measurable level.
The total amount wagered on US horse racing, called the handle, peaked at $15.18 billion in 2003. By 2025, that figure had fallen to $11.03 billion, the fourth consecutive year of decline. Adjusted for inflation, the real value of that wagering has fallen approximately 57 percent since the 2003 peak.
Part of what is driving that decline is structural. Legal sports betting in the US generated more than $121 billion in total wagers in 2024, and horse racing is competing for those same gambling dollars with a fundamentally different product.
Sports betting uses fixed odds. When you place a $20 bet on a football team, you know before the game starts exactly what you will win if they cover. The number is locked in the moment you commit. Horse racing uses a pari-mutuel system, which works differently: every bet on a given horse gets pooled together, the track takes a commission off the top, and whatever remains is divided among winning tickets based on how much everyone else wagered. The odds you see on the board when you pick your horse are not guaranteed. A surge of late money on the same horse can cut your payout. You do not know your exact return until after the race is over. For a casual bettor already comfortable with the simplicity of a sportsbook, pari-mutuel requires learning an entirely different logic. Most do not bother.
The contraction extends beyond wagering. The number of races run in the US in 2025 fell below 30,000 for the first time since the mid-1950s, according to Equibase records. Race days dropped 5.2 percent year over year.
The pipeline is under pressure at its source. The Jockey Club, which registers all North American thoroughbreds, projected the 2024 North American foal crop at approximately 18,000, the lowest level since 1964. The 2025 crop was projected to fall further, to 17,300. At the sport's peak in 1986, 51,296 thoroughbreds were registered in North America. The 2025 projection represents roughly one-third of that number, and the foal crop has declined in 18 of the last 19 years.
This matters because the foal crop is the supply chain for everything that follows: the field sizes, the number of race days, the quality of the racing calendar, the financial case for anyone to breed, buy, and train a horse. A shrinking foal crop does not threaten the Kentucky Derby's field of 20 in any immediate way. The best horses will always be there for the most valuable race. The contraction shows up in everything below: the mid-level cards, the regional tracks, the ecosystem of trainers, jockeys, and grooms who build careers on hundreds of non-Derby race days a year.
It would be too simple to frame CDI as extracting value from a sport it is not reinvesting in.
Kentucky law ties a portion of HRM revenue to thoroughbred purse accounts, and purse money is a direct financial incentive for owners and breeders to keep horses in training. CDI's expansion of HRM venues has, in measurable terms, pumped money into the Kentucky racing ecosystem. The record purse levels of 2021 and 2022 were substantially driven by HRM and gaming revenue flowing into accounts that breeders and owners depend on.
The record Derby viewership numbers also represent something real. An audience of 17.7 million for a horse race, in 2025, when fragmented media has gutted the live audiences of almost every other sport, is genuinely remarkable. If that reach can be converted into new interest in thoroughbred racing and horse ownership broadly, the trends could shift.
And $349 million wagered on a single day of racing demonstrates that the appetite to bet on horses, when the product is compelling and the context is right, is still very much alive.
The Kentucky Derby is not in trouble. The question is whether the industry that produces it is building toward something or running on inherited momentum.
CDI's business model is rational and well-executed. The company took a two-minute race and built a multi-billion dollar entertainment and gaming enterprise around it. That is a remarkable achievement.
But a brand can outlast the ecosystem it depends on, for a while. The thoroughbred breeding industry has been contracting for nearly two decades. Wagering handle has declined in four of the last five years. The number of races run in the US is at a seventy-year low. These are not isolated data points. They are structural trends in an industry competing, on unfavorable terms, against a sports betting market ten times its size.
CDI is investing $300 million in the grandstand at Churchill Downs. The question no one seems to be asking publicly is what that investment assumes about the sport underneath it, and whether those assumptions are still sound.
"The $441 million economic event will happen again next year. The industry that makes it possible is a different calculation entirely."
Economic impact figure. The $441 million estimate is from Louisville Tourism, as reported by the Lane Report (April 2026). Economic impact figures produced by tourism authorities use multiplier methodologies that are standard practice but not independently verified. The number reflects the generally accepted estimate for Derby Week, not a peer-reviewed calculation.
Handle figures. Total US thoroughbred wagering handle is published by Equibase and reported by BloodHorse and Thoroughbred Daily News. The 57 percent inflation-adjusted decline figure is derived from nominal handle data adjusted to 2003 dollars; this calculation is cited by multiple industry sources including Past the Wire and Thoroughbred Daily News.
CDI financial data. Revenue, EBITDA, and segment breakdowns are from CDI's full-year 2025 earnings release (GlobeNewswire, February 2026) and reported by BloodHorse and Paulick Report. The $160.9 million HRM-driven growth figure and the $0.7 million racetrack EBITDA contribution are from the same earnings release.
Foal crop figures. Registered thoroughbred foal crop data is from The Jockey Club's annual statistical reports. The 2024 figure of approximately 18,000 and the 2025 projection of 17,300 are Jockey Club projections as of 2024 and 2025 respectively, not final confirmed counts.
Capital investment figures. The $700 million historical figure for capital improvements at Churchill Downs is from the Kentucky Lantern (April 2026). The $300 million grandstand renovation figure is from CDI's December 2025 investor presentation; CDI has separately referenced a $280 to $300 million range for the same project.