Nintendo’s Q2 Stumble: Switch 2 Sales Plunge Amid Price Hikes, Analysts Disappointed
giant Nintendo has reported a challenging fiscal second quarter, missing analyst expectations for both revenue and net profit. The company saw a significant 41% year-over-year drop in Switch 2 unit sales, a performance likely exacerbated by recent price increases in key markets.
A Closer Look at the Quarterly Miss
For the three months ending September 30, Nintendo sold 2.67 million Switch 2 units, a notable decline from the 3.82 million units shifted in the previous quarter. This sharp decrease contributed to a quarterly revenue of 448.2 billion yen and a net profit of 73.5 billion yen. These figures fell short of analyst projections, which had anticipated 481.37 billion yen in revenue and 82.16 billion yen in net profit.
Operating profit also took a hit, falling 16% to 73.9 billion yen as overall sales dipped by 15%. This contrasts sharply with Bloomberg’s analyst consensus, which had predicted no change in operating profit compared to the prior year.
The Impact of Price Adjustments
Adding to the sales woes, Nintendo implemented price increases for the Switch 2 console in the U.S., Canada, and Japan during the quarter. In the U.S., the price climbed by $50 to $499.99 on September 1. While the company has not directly linked these increases to the sales decline, the timing suggests a potential correlation, making the console less accessible to some consumers.
Half-Year Performance: A Nuanced Picture
Despite the tough second quarter, the broader six-month period ending September 30 presents a more mixed, albeit still challenging, financial landscape. Switch 2 hardware sales for the half-year were down 37.4% to 6.49 million units. However, software sales showed resilience, rising 18.8% to 24.49 million units, indicating continued engagement with the platform’s extensive game library.
Overall net sales for the six months decreased by 12.1% to 966.0 billion yen. Interestingly, operating profit for the half-year surged by 49.1% to 216.5 billion yen, with net profit also rising 11.0% to 220.9 billion yen. These seemingly contradictory profit gains are largely attributed to a significant $300 million reduction in the cost of sales recorded in the first quarter, stemming from refunds of tariffs imposed under the International Emergency Economic Powers Act. Nintendo clarified that it had absorbed most of these tariff costs previously, rather than passing them on to consumers.
Looking Ahead: Unchanged Forecast and Game Pipeline
Despite the recent performance, Nintendo has maintained its full-year forecast, projecting net sales of 2.05 trillion yen, operating profit of 370.0 billion yen, net profit of 310.0 billion yen, and 16.50 million Switch 2 hardware units sold for the year ending March 2027. The company acknowledges that this forecast accounts for an estimated 100.0 billion yen impact from rising component prices and ongoing tariff measures.
The future also holds promise on the software front. Following the recent release of “The Legend of Zelda: Ocarina of Time,” Nintendo’s launch schedule includes two highly anticipated Pokémon titles, “Pokémon Winds” and “Pokémon Waves,” slated for 2027. These major releases could provide a significant boost to software sales and console demand in the coming years.
Conclusion
Nintendo faces a critical period. While strong software performance and one-off tariff refunds have cushioned some financial blows, the sharp decline in Switch 2 hardware sales and the impact of price hikes signal a need for strategic adjustments. The company’s ability to meet its ambitious full-year forecast will heavily depend on overcoming these hardware challenges and leveraging its robust pipeline of beloved game franchises.
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