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Nintendo says it has sold more than 6mn Switch 2 gaming consoles in their first seven weeks on sale, breaking records and driving a new cycle of revenues and profits for the Japanese creator of the Mario and Zelda game franchises.
The upgraded version of the hybrid home console and handheld gaming machine went on sale in June, eight years after the original Switch, benefiting from pent-up demand for the long-awaited successor. Anticipation and the enthusiastic reception have helped drive Nintendo’s share price 39 per cent higher this year.
“It has already sold twice what the original Switch sold in its first month, it’s the strongest console debut ever and is set to continue,” said Atul Goyal, analyst at investment bank Jefferies.
For the first quarter of its fiscal year to the end of June, the Kyoto-based company said revenues rose by 132.1 per cent year-on-year to ¥572.3bn ($3.8bn), while operating profit increased 4.4 per cent to ¥56.9bn. That beat analyst expectations of closer to ¥53.5bn, according to LSEG data.
Demand for the new Switch comes despite complaints about a price tag of around $450 — 50 per cent higher than the original console when launched in 2017 — and games hitting $80 for premium titles such as Mario Kart World.
Profit margins can still be squeezed by the high costs of the latest hardware at launch, before those components become cheaper in later years of the cycle.
“Launch cycles inherently compress early margins due to hardware’s low profitability . . . dominating the mix, which improves over time as software sales, with higher margins . . . gain weight,” said Jefferies’ Goyal.
On Thursday, Nintendo said it estimated more than 6mn units were sold in seven weeks to consumers and maintained its forecast of 15mn Switch 2 sales this fiscal year, as well as 45mn games. A number of analysts believe the forecast is conservative, with demand still exceeding supply in many countries, according to the company. More than 150mn units of the original Switch and almost 1.4bn dedicated games have been sold.
Revenues for the original fell 53.5 per cent year-on-year as just under 1mn units were sold in the quarter — a predictable slowdown as the console faced competition from its successor.
The Switch 2 was launched into the teeth of US President Donald Trump’s trade war. Nintendo has for years been moving production away from China and towards Vietnam, which is now subject to a 20 per cent levy.
However, analysts say the company appears to have weathered the tariff storm, even though Nintendo has warned it may have to raise console prices at some stage, depending on the situation.
On Thursday, it said it regretted the inconvenience to consumers of demand exceeding supply, adding: “We will continue to strengthen our production and supply systems to deliver as much Nintendo Switch 2 hardware as possible.”
