Key Points
- Nintendo shares dropped 8.4% in Tokyo trading to 7,020 yen, marking the weakest level since August 2024
- Memory chip cost inflation driven by AI sector demand forced Switch 2 price increases up to 20% across major markets
- Company projects 16.5 million Switch 2 console sales for current fiscal year, below the 19.86 million sold at launch
- Annual operating profit guidance of 370 billion yen significantly trails analyst consensus of 480 billion yen
- Market experts suggest Nintendo’s projections may be deliberately cautious, with Morningstar predicting 19 million unit sales
Shares of Nintendo experienced a sharp decline Monday following the release of annual results and forward guidance that disappointed Wall Street.
The gaming giant’s stock tumbled 8.4% to close at 7,020 yen in Tokyo — representing the lowest closing price since August 2024. Year-to-date, shares have now declined 34% in 2026.
Operating profit for the fiscal year ending March 31 climbed nearly 28% to reach 360 billion yen, supported by net sales that almost doubled. However, these results still fell short of market consensus.
The company’s projections for fiscal 2027 triggered even greater alarm bells. Nintendo outlined operating profit expectations of 370 billion yen, substantially below the 480 billion yen analysts had anticipated. Revenue is projected to decline 11.4% to 2.05 trillion yen for the year.
Central to investor anxiety is the Switch 2 console. The company anticipates selling 16.5 million units during the current fiscal period — a notable decrease from the 19.86 million units moved since its June 2025 debut.
Rising Switch 2 Costs Weigh on Demand Projections
Last Friday, Nintendo unveiled price adjustments for the Switch 2 spanning the United States, Japan, and European markets. American consumers will see a $50 increase, while Japanese buyers face a 10,000 yen jump. These changes represent price escalations ranging from 7% to 20% depending on the region.
The driver: escalating memory chip costs fueled by robust AI infrastructure investment. Rising component expenses are compressing hardware profit margins and are anticipated to cool consumer appetite.
“The biggest factor is of course the price hike that Nintendo thinks will lead to softer demand,” said Serkan Toto, CEO of Kantan Games.
Software projections also raise questions. Nintendo expects combined Switch and Switch 2 software sales of 165 million units in fiscal 2027 — representing an approximately 11% year-over-year contraction. This forecast has sparked debate about Nintendo’s conviction in its development roadmap.
Market watchers are eagerly anticipating announcement of a “Nintendo Direct” presentation to unveil forthcoming releases, especially those showcasing beloved franchises like Mario and Zelda.
Market Observers Question Conservative Projections
Not all industry watchers share the pessimistic view. Nintendo maintains a track record of publishing cautious forecasts, and several analysts believe this pattern continues.
Kazunori Ito, director at Morningstar, characterized the guidance as “overly conservative.” His models project Switch 2 sales reaching 19 million units this fiscal year, surpassing Nintendo’s official target. He also anticipates software sales hitting 205 million units, significantly exceeding the company’s 165 million projection.
“We view Nintendo’s stock as undervalued,” Ito stated, noting that markets are “underappreciating the long-term earnings growth from over 100 million Switch users migrating to the new platform.”
Toto shared this perspective: “I believe that Nintendo is, as usual, lowballing because users will get used to the new price of the console over time.”
On a more optimistic note, Nintendo highlighted a robust third-party development schedule arriving in upcoming months. Initial Switch 2 releases including “Mario Kart World” and “Pokémon Pokopia” have delivered solid performance — the latter moving over 4 million copies within its first five weeks.
Toto suggested that a new Nintendo Direct presentation outlining the 2026 software calendar could arrive as early as next month.
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