Tokyo, 4 Feb 2026, 22:16 JST
- Nintendo’s shares dropped 11% in Tokyo after investors raised doubts about demand for the Switch 2 and its lineup of games
- Nintendo reported that sales from April to December almost doubled, reaching 1.91 trillion yen, driven by 17.37 million Switch 2 units sold by the end of December
- The company maintained its full-year net profit forecast at 350 billion yen, falling short of the LSEG poll average of 406 billion yen
Nintendo’s shares dropped 11% in Tokyo Wednesday, wiping out recent gains as investors questioned whether the Switch 2 can maintain its initial momentum. 1
The selloff hits hard because this console cycle is Nintendo’s key engine for near-term profits. The stock had surged on expectations that the Switch 2 would replicate the original Switch’s success. But instead, Nintendo’s steady profit forecast came in under what analysts expected.
Investors are focused on two fronts: can Nintendo grow its user base fast enough, and can it avoid margin pressure while doing so? Even with strong hardware sales, a shift towards lower-margin software and rising component costs could hurt profits.
Nintendo posted net sales of 1,905.8 billion yen for the nine months ending Dec. 31, alongside an operating profit of 300.3 billion yen and net profit hitting 358.8 billion yen. The company reported Switch 2 hardware shipments to retailers and partners—on a “sell-in” basis—reached 17.37 million units by the end of December. Meanwhile, Switch 2 software sales totaled 37.93 million units. 2
“The Switch 2 launched strong, and sales picked up during the year-end rush,” Nintendo President Shuntaro Furukawa said at an online press event. He noted that while rising semiconductor memory chip costs haven’t hit profits hard yet, they could dent earnings if prices remain elevated. 3
Nintendo held firm on its annual net profit forecast of 350 billion yen ($2.24 billion), Reuters reported, falling short of the 406 billion yen average predicted by 27 analysts surveyed by LSEG. The company also set its sights on selling 19 million Switch 2 consoles by March 2026, alongside 48 million software units for the same period.
“Results are good with (the Switch 2) breaking records,” Jefferies analyst Atul Goyal said, though he added they’re “not great.” He noted, “The run is just starting and the platform is growing rapidly.” Nintendo shares soared to record highs last year but have been on a downturn since November, Reuters reported.
Some investors worry the Switch 2 lacks enough major new titles to sustain demand as the launch window closes. Nintendo kept the original Switch thriving with blockbuster hits, including two huge “The Legend of Zelda” games, and investors want to see that kind of momentum again.
“The new Switch 2 console isn’t moving nearly as much software as its predecessor,” Amir Anvarzadeh from Asymmetric Advisors noted. He also highlighted stiff competition for gamers’ attention from Roblox and Take-Two Interactive’s upcoming “Grand Theft Auto VI,” set for release in November.
The numbers explain why margins are under scrutiny. Nintendo’s gross profit margin dropped significantly over the nine months, largely because hardware sales surged following the Switch 2 launch. Since the Switch 2 has a slimmer margin compared to the original Switch, that shift hit overall profitability.
Memory chips are turning into the next big challenge. Nintendo claims the price hike isn’t hitting earnings much this financial year but warns it could squeeze profits if prices stay high. “Console profitability will decline further starting next fiscal year due to the ongoing surge in memory prices,” Morningstar analyst Kazunori Ito noted.
Timing and game releases still hold a lot of sway. Should Nintendo drop major hits that boost software sales per console — known as the “attach rate” — investors might shrug off short-term margin squeeze. But if chip costs remain high and key titles miss the mark, the market will keep doubting the growth narrative, even if hardware demand stays solid.
Nintendo is holding firm on its current outlook. The stock’s reaction indicates investors are looking for confirmation that early hardware demand for the Switch 2 will translate into sustained software sales, rather than just an initial surge.
