Nintendo’s Switch 2 Sales Fell 41% In The September Quarter As Memory Costs Bit And Operating Profit Dropped 16%, Missing Analyst Estimates

Nintendo's half-year financial results tell a seemingly contradictory story: sales fell 12.1% to ¥966.0 billion ($6.23 billion), but operating profit rose 49.1% to ¥216.5 billion ($1.40 billion). Basically, a company that shipped meaningfully less hardware made considerably more money doing so.

However, that's only valid for the full six months, during which the April–June quarter (which included both the tariff refund and stronger hardware shipments) did much of the lifting. In the July–September quarter, the picture inverted: operating profit fell 16% to ¥73.9 billion ($477 million) against analyst expectations of ¥88.1 billion, net profit dropped 29% to ¥73.5 billion ($474 million), and revenue fell 15% to ¥448.2 billion ($2.89 billion), missing estimates on both lines. The Switch 2 console shipped 2.67 million units in the quarter, down 41% year-on-year and well below the 3.82 million shipped in the preceding three months, following price increases in the US, Canada and Japan and continued pressure on memory supply.

The Software Attach Rate is Doing the Work

Switch 2 hardware shipped 6.49 million units this fiscal year, well down on the launch-inflated period a year ago, while Switch 2 software moved 24.49 million copies. Nintendo described this as maintaining momentum, which makes sense for the game sales, at least.

Splatoon Raiders, launched in July, has sold 2.42 million, while Fire Emblem: Fortune's Weave managed 1.34 million from its September release. The Star Fox remake that debuted in June sits at 1.17 million. None of those are generational blockbusters on their own, but Nintendo notes that Mario Kart World and Pokémon Pokopia, both massive hits from the previous fiscal year, have continued to sell well.

The more interesting passage concerns the original Switch. Nintendo explains that because consumers can also play Switch software on Switch 2, titles released in past fiscal years have shown stable sales. Switch software moved 65.73 million units this fiscal year so far, nearly three times the Switch 2 figure, with Tomodachi Life: Living the Dream selling 8.81 million copies and Rhythm Heaven Groove reaching 2.89 million units sold.

That's backward compatibility functioning as a proper business model: the Switch's massive 157-million-unit installed base will gradually migrate to the Switch 2 while continuing to buy Nintendo software.

IP-Related Business is Now a Real Revenue Line

Nintendo's IP-related business reached ¥62.7 billion ($404 million), up 87.9%, which the company attributes to strong audience engagement with The Super Mario Galaxy Movie (the film registered over a billion in global box office revenue). That's a fairly small figure beside the games business, but it's growing faster than anything else, with more to come given that The Legend of Zelda live action film opens in theaters on April 30, 2027.

Guidance is unchanged from May: ¥2,050 billion ($13.23 billion) in sales and ¥370 billion ($2.39 billion) in operating profit for the full year. Since Nintendo has already banked ¥216.5 billion of that operating profit, the implied holiday half is substantially weaker than the one just reported, even though it should carry higher sales. Read plainly, the company is telling investors that it expects to sell hardware into the holidays at thinner margins than it sold software into the summer, without a tariff refund to cushion it.

The other big Japanese console manufacturer, Sony's PlayStation, also reported its quarterly financials today; read about its results here.

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