Nintendo delivered stronger-than-expected fiscal first-quarter results on Thursday, with both revenue and profit comfortably exceeding analyst forecasts, even as sales of its flagship Switch 2 console declined sharply from the previous year.
The Japanese gaming company reported revenue of 517.8 billion yen ($3.28 billion) for the quarter ended June 30, well above the 444.96 billion yen expected by analysts surveyed by LSEG. Net profit came in at 147.4 billion yen, nearly double the consensus estimate of 78.3 billion yen.
Nintendo shares closed 2.87% higher ahead of the earnings announcement, reflecting investor optimism about the company’s software performance and long-term outlook.
Switch 2 Sales Fall More Than 34%
Despite the earnings beat, Nintendo’s hardware business showed signs of slowing momentum.
The company said Switch 2 hardware sales fell 34.4% year over year to 3.82 million units, while sales of the original Nintendo Switch dropped 31.8% to 660,000 units.
Nintendo emphasized that consumer adoption of the Switch 2 remains healthy, arguing that demand continues to be supported by new game releases, marketing initiatives, and ongoing engagement with the platform.
The decline is notable because the Switch 2 was launched only last year, and investors had been watching closely to see whether the new console could maintain the strong early sales trajectory typically associated with major Nintendo hardware launches.
Full-Year Forecast Left Unchanged
Nintendo chose to maintain its full-year forecast for the fiscal year ending March 2027, leaving its net sales target at 2.05 trillion yen.
By keeping its guidance unchanged, management signaled confidence that upcoming software releases and seasonal demand later in the fiscal year can offset the recent slowdown in hardware sales.
The decision also suggests that Nintendo does not currently see the weaker first-quarter hardware numbers as severe enough to warrant a downward revision to its broader outlook.
Memory Costs and Tariffs Add Pressure
One of the more important details in the earnings report was Nintendo’s warning about rising production costs.
The company said it has already incorporated nearly 100 billion yen in additional costs related to higher component prices, especially memory chips, as well as tariffs.
The Switch 2 relies heavily on advanced memory components, and prices for those chips have risen significantly as artificial intelligence companies continue purchasing large volumes of memory for AI servers and data centers.
The surge in AI-related demand has created tighter supply conditions across the semiconductor industry, affecting not only technology companies but also consumer electronics manufacturers such as Nintendo.
Strong Software Sales Drive Results
While hardware sales weakened, Nintendo’s software business remained a major bright spot.
The company reported strong demand for several key titles:
- Tomodachi Life: Living the Dream sold 7.94 million units
- Pokémon Pokopia sold 1.27 million units
Nintendo said that maintaining a steady pipeline of new game releases is essential for expanding the Switch 2 installed base and attracting a broader range of players.
The company noted that releasing titles at regular intervals helps sustain consumer interest in the platform and encourages both new purchases and continued engagement from existing users.
This strategy has long been one of Nintendo’s competitive advantages, as its first-party franchises often continue generating sales for years after launch.
Japanese Demand Remains Resilient
Nintendo also highlighted continued strength in its home market.
The company raised Switch 2 prices in Japan on May 25, yet said sell-through has remained solid, indicating that demand has so far proven resilient despite the higher price tag.
That performance may provide some reassurance to investors concerned that rising hardware prices could significantly weaken consumer appetite for the new console.
U.S. Price Increase Takes Effect in September
Nintendo previously announced a $50 price increase for the Switch 2 in the United States, with the retail price set to rise from $449.99 to $499.99 starting September 1.
The increase reflects both higher component costs and broader inflationary pressures affecting electronics manufacturing and global supply chains.
The higher U.S. price could become an important test of how much pricing power Nintendo retains in international markets as production costs continue to rise.
Mario Movie Becomes Another Billion-Dollar Hit
Beyond its gaming business, Nintendo continues to benefit from the rapid expansion of its entertainment franchise strategy.
The company said “The Super Mario Galaxy Movie” has generated more than $1 billion in global box office revenue since its worldwide release on April 1.
That makes it the second highest-grossing film ever based on a video game, underscoring Nintendo’s growing success in turning its iconic characters into major cross-media entertainment properties.
The strong performance of Mario-related films, theme parks, merchandise, and other licensing initiatives is becoming an increasingly important contributor to Nintendo’s broader ecosystem, reducing its dependence on console hardware sales alone.
Investors Focus on the Software-Led Strategy
The latest results highlight a familiar pattern for Nintendo: hardware sales can fluctuate significantly, but strong first-party software and franchise monetization continue to drive profitability.
The company now faces several key questions for the remainder of fiscal 2027:
- Can Switch 2 sales stabilize after the sharp year-over-year decline?
- Will upcoming game releases be strong enough to accelerate hardware adoption?
- How much will rising memory and component costs pressure margins?
- Can Nintendo continue expanding its entertainment business beyond traditional gaming?
For now, the company has delivered a reassuring message to investors. Even with weaker console sales, strong software demand, resilient Japanese market performance, and growing entertainment revenue helped Nintendo produce a substantial earnings beat and maintain its full-year outlook.
Source: Nintendo fiscal Q1 2026 earnings, LSEG estimates, and company statements
Wealth Orbit Centre
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