Nintendo (NTDOY, Financial) has announced a fifth consecutive quarterly profit decline due to sluggish demand for its Switch gaming console, significantly lowering its full-year forecast. The company's second-quarter earnings, ending September 30, showed revenue of 276.7 billion yen (approximately $1.8 billion), a 17% decrease from the previous year, though slightly above market expectations of 273.34 billion yen. Net profit plummeted 69% to 27.7 billion yen, far below forecasts of 48.06 billion yen, while operating profit fell 29% to 67 billion yen, missing market projections.
Nintendo reduced its full-year operating profit forecast by 10% to 360 billion yen (around $2.4 billion) and estimates that Switch sales for the current fiscal year will reach only 12.5 million units, down from an earlier prediction of 13.5 million units. It is unusual for gaming companies to lower expectations before the crucial holiday shopping season.
The company faces declining demand for its flagship Switch console, which has been in the market for over seven years, as consumers await a new version. Nintendo has revealed that a successor to the Switch will be launched by March 2025. Over the six months ending September 30, Switch sales totaled 4.72 million units, a sharp decline from 6.84 million units during the same period the previous year.
Hideki Yasuda, an analyst at Toyo Securities, noted that the lifecycle of the Switch is nearing its end, with even software sales showing weakness. If these trends persist, the Switch's momentum could further decrease.
As the holiday season approaches, competitors Sony and Microsoft are set to unveil sleeker, more powerful products. In contrast, Nintendo is focusing on leveraging its intellectual property by launching various products, including a $99 alarm clock featuring Nintendo game characters, a Nintendo music smartphone app for online service subscribers, and a museum near its headquarters. Moreover, its subsidiary, Pokémon Co., has released a smartphone app version of its trading card game to boost revenues.
Additionally, Nintendo is expanding its presence in Hollywood. Encouraged by the success of last year's "Super Mario Bros. Movie," the company is collaborating with Illumination to produce another Mario Bros. film. It is also working on a live-action film based on "The Legend of Zelda."
Tokyo-based analyst Serkan Toto commented that Nintendo may have overestimated the appeal of its 2024 software lineup, which lacks significant blockbuster titles. Given the software expected to release this fiscal year, he believes that the revised hardware and software sales forecasts could still be too optimistic.
