You're probably confused by what Hatate's thoughts were before they fought. Here's a slightly more verbatim translation than what's on the wiki, even though I'm pretty sure the wiki translation gets it across pretty well:
私は今回の決闘であわよくば人間がやられてもいいや、と思っていたがそんな危険性はまるで無く、人間の成長の目覚ましさが見て取れたわけである。
I was thinking that in this match, even if by chance the human lost, it would be fine, but that sort of risk was completely nonexistent; I got to witness the splendid growth (in strength) of a human.
And of course the last two paragraphs are entirely about how much stronger humans have become and how youkai shouldn't be underestimating them. Personally, I also take Hatate's wording of 今回の決闘で (in this/today's match) to imply something about her overall thoughts. "In this match in particular, because Marisa isn't being serious at all and treating it like a game with a kid, there's the possibility that she'll lose, and even if she loses it's fine with me because that's funny". In other words, she wasn't expecting Cirno to put up much of a fight to begin with, but given the handicaps Hatate thought Marisa could lose by some stroke of luck. However, even with those handicaps Cirno got nowhere close to beating Marisa.
The Tengu are a youkai race that have been alive to witness many generations of humans, and she notes that many youkai still think that humans are as weak as they used to be several hundreds of years ago. Hatate however witnessed first-hand that humans have grown such that some are able to play around with fairies without any fear of death, and by saying that youkai shouldn't underestimate them, ponders that the humans may at some point become strong enough to actually rival youkai.