Nintendo’s stock price plummeted 10% on May 11th, hitting its lowest point since August 2024, with the market expressing concerns over the Switch 2’s price hike, insufficient core game supply, and the company’s downward revision of its financial performance for the next fiscal year.
Nintendo recently released its consolidated financial report for the 2026 fiscal year (April 2025 to March 2026) and its earnings outlook for the 2027 fiscal year. Despite the significant growth in the previous fiscal year, the company’s conservative forecast for the next fiscal year has triggered a risk-averse sentiment among investors.
According to the financial report, Nintendo’s net sales for the 2026 fiscal year reached 2.313 trillion yen (approximately 100.752 billion yuan), a significant increase of 98.6% year-over-year; operating profit reached 360.1 billion yen, a 27.5% increase; and net profit attributable to the parent company’s shareholders reached 424 billion yen, a 52.1% increase, driven primarily by the strong sales of the new Switch 2 console.
However, Nintendo’s outlook for the 2027 fiscal year is not optimistic. The company expects net sales to decline to 2.05 trillion yen, a 11.4% decrease year-over-year; net profit is expected to be 310 billion yen, a 26.9% decrease; and the annual dividend will be reduced from 219 yen to 162 yen, with profitability and shareholder returns shrinking simultaneously.
The core reason for the decline in performance is the lifecycle pace and cost pressure of the Switch 2. Nintendo stated that the first-year sales of the Switch 2 were concentrated, and the global price adjustment will affect the 2027 fiscal year’s hardware shipments, which are expected to be 16.5 million units, a 16.9% decrease from the 2026 fiscal year’s 19.86 million units; software sales for the Switch 2 are expected to be 60 million units, a 23.2% increase, but this will not be enough to offset the decline in hardware sales.
Notably, Nintendo has also announced a price hike for the Switch 2 in major markets worldwide to cope with the rising hardware costs.
According to the official announcement, the Japanese market’s Switch 2 Japanese version will be priced at 59,980 yen, a 20% increase, starting from May 25th; the US market will see a price increase from $449.99 to $499.99, starting from September 1st; and the European market will also see a price increase from 469.99 euros to 499.99 euros, starting from September 1st, with a global price hike.
Nintendo stated in the financial report that the price hike is mainly due to the continuous increase in the prices of core components such as memory, as well as the impact of US tariffs, which will have a significant impact on sales costs, forcing the company to adjust prices to maintain profitability.
As the core product driving this earnings volatility, the Switch 2 has shown strong market appeal since its release on June 5th last year, with first-year sales of nearly 20 million units, software sales of 48.71 million units, and annual active users exceeding 100 million, outperforming the first-year performance of the original Switch.
Additionally, Mario Kart World has sold 14.7 million units globally, and Pokémon Legends Z-A for the Switch 2 has sold 3.94 million units, with first-party titles supporting the new console’s ecosystem, and the global box office for Super Mario Galaxy Movie exceeding $800 million in four weeks, further strengthening the IP’s influence.
From a business structure perspective, Nintendo’s hardware sales accounted for 66.7% of its total sales in the 2026 fiscal year, a significant increase of 23 percentage points from the previous fiscal year, indicating a high dependence on hardware revenue. This also means that if console sales decline, overall performance will be directly affected.
Digital business maintained stable growth, with Nintendo’s digital sales reaching 407.6 billion yen in the 2026 fiscal year, a 25% increase year-over-year, and digital sales accounting for 54.6% of total sales, but this will not be enough to offset the decline in hardware sales and cost pressure in the short term.
On the cost side, Nintendo’s research and development expenses for the 2026 fiscal year were 177.892 billion yen, a 23.7% increase year-over-year, and advertising expenses were 144.684 billion yen, a 67.1% increase, with continued investment in new products and technology, further compressing profit margins.
Capital market and industry analysts have mixed reactions to Nintendo’s financial report and price hike. Some believe that the Switch 2’s first-year sales were front-loaded, and the price hike will affect second-year sales, leading to a larger-than-expected decline, while the lack of core titles will slow down user activity and software sales growth. Morningstar analyst Kazunori Ito pointed out that the guidance for a year-over-year decline in software shipments may signal that Nintendo lacks confidence in its product pipeline.
Optimistic institutions believe that the second year of a new console’s release usually sees an acceleration of user penetration, and current expectations are overly pessimistic, with the Switch 2’s cumulative sales still in a healthy range, and future first-party titles may drive sales growth.
This stock price plunge and earnings downgrade mark Nintendo’s transition from the new console release bonus period to the growth verification period, with cost pressure, price hike impact, and product pace being the three key variables determining its future performance.
For this gaming giant, which relies on hardware lifecycle and IP iteration, finding a balance between controlling costs and maintaining user growth, and continuously activating the ecosystem through heavyweight titles, will be the key to reversing market pessimism and returning to a growth trajectory.
