Nintendo has presented its latest business report. While the Switch manufacturer is still in the profit zone, revenues are shrinking.
The gaming industry is in a slump after the booming pandemic years. Consoles are being sold less than a year ago, which mainly affects Xbox and Nintendo products.
In the case of the Switch, the declines are an expected development: the console, released in March 2017, is at the end of its life cycle, which Nintendo is increasingly feeling.
In its latest annual report, the Japanese company had to admit to significant declines in profits. However, the comparable quarter of the previous year was driven by two blockbusters that were missing this year.
Lack of software offerings causes profits to shrink
In its latest annual report, Nintendo announced that it posted an operating profit of 54.51 billion yen (338 million euros) in the three months to June 2024. In the same quarter last year, it was 185.4 billion yen (1.15 billion euros).
It is not just the aging Switch that is responsible for this: a year ago, revenue was boosted by “The Legend of Zelda: Tears of the Kingdom” and “The Super Mario Bros. Movie”.
“In the first quarter of last fiscal year, unit sales for both hardware and software were extremely high for a first quarter, as the Super Mario Bros movie boosted our dedicated video game platform business and The Legend of Zelda: Tears of the Kingdom was released along with hardware specifically tuned to that title,” Nintendo explained.
However, even Nintendo had expected a significantly higher profit for the last quarter and expected 93.7 billion yen (582 million euros).
“Hardware shipments are in line with the lack of software offerings from the big names. The market was too optimistic,” said Kazunori Ito, director of Morningstar Investment, commenting on the situation. An increase in sales and administrative expenses due to the weak yen was also a “negative surprise.”
Analysts doubt Nintendo’s hardware forecast
In the last fiscal quarter, Nintendo sold 2.1 million units of the Switch, a decrease of 46 percent compared to the previous year.
In the entire fiscal year, which runs until the end of March 2025, the traditional Japanese company wants to sell 13.5 million Switch devices. It is a forecast that analysts doubt. They assume ten million units, as consumers wait for the release of the new console.
“I really wonder how Nintendo plans to achieve its hardware sales target,” Tokyo-based analyst Serkan Toto told Bloomberg. “I’m skeptical that Nintendo has enough gas left in the tank, especially if they plan to reach the goal without hardware price cuts.”
It is still unclear when exactly the Switch 2 will be launched. A release for the 2025 Christmas season sounds plausible. However, the unveiling period for the new console is known. Nintendo also has a plan to make life difficult for scalpers.
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