Nintendo Switch 2 Shipments Fall 41% as Higher Costs Test Its Second Year

Fewer consoles sold, more profit earned

Nintendo shipped 2.67 million Switch 2 consoles in July through September 2026, down 41% from 4.54 million a year earlier, as higher memory costs and rising retail prices put pressure on the console's second year. Yet the company's results for the six months through September showed a different picture: operating profit rose 49.1% to 216.5 billion yen, helped by software sales, digital spending and a substantial US tariff refund.

The results, announced on November 5 for the fiscal year ending March 2027, show Nintendo managing two different challenges. It needs to persuade more households to buy its newest machine while earning more from people who already own its consoles. Games and character related businesses helped support earnings even as hardware shipments declined.

Revenue for April through September fell 12.1% to 966.041 billion yen. Switch 2 shipments totaled 6.49 million, down 37.4%, while shipments of the original Switch fell 32.7% to 1.27 million. These figures measure consoles sold into distribution channels, rather than purchases made directly by individual players.

Nintendo kept its annual targets unchanged, including 16.5 million Switch 2 consoles and operating profit of 370 billion yen. Reaching the hardware target now requires 10.01 million shipments between October and March, making the holiday shopping season central to the company's plans.

The slowdown extends beyond the launch comparison

Switch 2 shipments fell from 3.82 million in April through June to 2.67 million in July through September, a decline of about 30%. That comparison matters because it shows a slowdown within the current fiscal year, alongside the larger decline against the console's launch period.

Nintendo launched Switch 2 in June 2025 and sold 19.86 million units in roughly its first 10 months. The current annual target of 16.5 million is 3.36 million lower, a decline of 16.9%. The business is therefore planning for fewer console shipments across a full fiscal year than it achieved during the shorter launch year.

Higher prices, the fading rush of launch purchases and the timing of major games all help explain the pressure on demand. Nintendo's task is to turn interest in particular games into purchases of the machine needed to play them.

By September 30, cumulative Switch 2 shipments had reached 26.35 million consoles, with 73.21 million games sold. The original Switch remained much larger, at 157.2 million consoles and about 1.594 billion games over its lifetime. Nintendo is supporting both audiences while trying to move more players toward the newer system.

Memory costs reach the checkout

Nintendo's price changes bring the manufacturing squeeze directly to consumers. The US price was scheduled to rise from $449.99 to $499.99 on September 1, an increase of $50, or about 11.1%. In Japan, the announced change was from 49,980 yen to 59,980 yen on May 25, an increase of 10,000 yen, or about 20%.

Price increases were also expected in Europe and Canada. Nintendo linked the changes to market conditions and the global economic environment, while estimating a combined impact of around 100 billion yen from higher component costs and tariff measures. That estimate covers more than memory chips alone.

Memory chips help a console hold information needed to run games. Growing demand from data centres used for artificial intelligence has increased competition for memory supply, adding pressure to the cost of making gaming hardware. A higher component bill leaves a manufacturer choosing how much to absorb and how much to pass to customers.

Sony had also raised PlayStation 5 prices in recent months. For Nintendo, the timing is difficult: a console that already cost roughly 50% more than the original Switch at launch is becoming more expensive as the company seeks buyers beyond its earliest customers.

Why quarterly profit fell while half year profit rose

Nintendo's operating profit for July through September fell 16% to 73.9 billion yen, below market expectations of 88 billion yen. Operating profit measures earnings from the business after production and operating expenses, before items such as taxes.

The six month total still increased because it includes the stronger April through June period. Subtracting the latest quarter's 73.9 billion yen from the half year total of 216.5 billion yen gives operating profit of 142.6 billion yen for the first quarter.

A US tariff refund helped that earlier period. Nintendo deducted about $300 million from its cost of sales in the first quarter after receiving refunds of tariffs imposed under the International Emergency Economic Powers Act, known as IEEPA. Lower recorded costs increased the profit retained from revenue.

Software also represented a larger share of the business. Nintendo's gross profit margin, the share of revenue left after the direct cost of goods sold, rose from 36.2% to 50.4%. Its operating profit margin increased from 13.2% to 22.4%, even as research and development spending and other operating expenses rose.

Those changes explain how revenue could fall while profit increased. Nintendo sold fewer consoles, but a more profitable mix of sales and the tariff refund improved the amount it kept. Half year net income attributable to shareholders rose 11% to 220.917 billion yen.

Games provide support across both consoles

Switch 2 software sales reached 24.49 million copies in April through September, up 18.8%. The July through September figure was 15.03 million, up 26%, indicating that game purchases grew while console shipments contracted.

A conflicting figure of 46.95 million Switch 2 games was also reported alongside the quarterly earnings, without a clear explanation of its measurement period. The detailed half year breakdown puts sales at 24.49 million, against Nintendo's unchanged annual target of 60 million.

Splatoon Raiders, released in July, sold 2.42 million copies, while September's Fire Emblem: Fortune's Weave sold 1.34 million. Star Fox, released in June, sold 1.17 million, and Mario Kart World added 1.78 million during the half year. Pokémon Pokopia also continued selling after becoming one of the platform's leading titles.

The original Switch supplied a substantial share of game purchases. Its software sales rose 6.8% to 65.73 million copies, more than twice the Switch 2 total for the same six months. Tomodachi Collection: Wakuwaku Life, released in April, sold 8.81 million copies, while July's Rhythm Heaven: Miracle Stars sold 2.89 million.

Nintendo's older console therefore remains commercially valuable even as its hardware sales decline. Millions of existing owners can buy new games without purchasing another machine, supporting earnings during the transition to Switch 2.

Digital spending and characters broaden the business

Nintendo's digital revenue reached 249.6 billion yen in the first half, up 60.5%, and represented 60.7% of software revenue. For July through September, digital revenue rose 37% and accounted for 59.8%. The different percentages cover different periods.

Digital revenue includes downloaded games, additional game content and Nintendo Switch Online services. Its share is measured by revenue, so it describes how much money comes from digital purchases rather than the percentage of game copies downloaded.

Income from intellectual property related activities and other associated businesses rose 87.9% to 62.7 billion yen. This category includes film content, payments through smartphone services, licensing fees and merchandise sold through official stores.

The Super Mario Galaxy Movie contributed to the increase in film related income and took nearly $900 million at cinemas worldwide. Cinema ticket sales and Nintendo's own revenue are different measures: the company's earnings come through its participation in the film and related commercial arrangements.

Nintendo still depends heavily on gaming hardware and software. Dedicated game systems accounted for about 97% of revenue in the previous fiscal year. Films and merchandise are growing sources of income, while the console business remains the main engine.

The launch year already showed cost pressure

Nintendo's fiscal year ending March 2026 produced revenue of about 2.3 trillion yen, up 98.6%, as Switch 2 reached the market. The near doubling of sales came with a much larger production bill.

Cost of sales exceeded 1.4 trillion yen, more than three times the previous year's level. Material costs roughly doubled to about 1.2 trillion yen. Gross profit increased 28% to 909 billion yen, a much slower pace than revenue growth, and remained below the level achieved in the fiscal year ending March 2024.

Operating profit rose 27.5%, but the operating margin was 15.6%. The figures show why selling large numbers of consoles can produce impressive revenue without an equally large increase in profit: manufacturing the machines consumes a substantial part of their selling price.

Annual active player counts have also plateaued since the fiscal year ending March 2025. Nintendo measures this audience through accounts that launched software at least once during a year. A broadly flat total suggests much of the early Switch 2 business has come from existing players upgrading, making the expansion of the audience another commercial priority.

The dates shaping the holiday push

Nintendo's release schedule and price changes place several important events around the latest results. The sequence connects the console's launch surge, the current slowdown and the entertainment releases expected to support demand.

• June 2025: Switch 2 launched, beginning a period that produced 19.86 million shipments by March 2026.
• May 25, 2026: The announced Japanese price increase took the console from 49,980 yen to 59,980 yen.
• July through September 2026: Switch 2 shipments fell to 2.67 million, while Splatoon Raiders and Fire Emblem: Fortune's Weave reached the market.
• September 1, 2026: The announced US price increase took the console from $449.99 to $499.99.
• November 5, 2026: Nintendo announced its half year results and maintained its annual forecasts.
• November 6, 2026: A results briefing was scheduled to provide further detail on profitability and console sales plans.
• March 31, 2027: Nintendo's current fiscal year ends.
• April 30, 2027: The live action Legend of Zelda film was scheduled for release.

The Legend of Zelda: Ocarina of Time remake is another focus of the holiday sales outlook. It was described as an upcoming release in the initial earnings account and as a Switch 2 exclusive released on Wednesday, November 4, in the November 5 market assessment, which gave it a Metacritic score of 96.

The film's scheduled April release falls after the current fiscal year ends. Its promotion could still draw attention to Zelda during Nintendo's current sales period, while the game gives buyers a more immediate reason to consider Switch 2.

What Nintendo must sell next

Nintendo needs 10.01 million Switch 2 shipments in October through March to reach its 16.5 million annual goal. That is about 54% more than the 6.49 million shipped in the first half. For software, reaching 60 million copies requires another 35.51 million, about 45% above the first half total.

The company also maintained forecasts for annual revenue of 2.05 trillion yen, down 11.4%, and net income of 310 billion yen, down 26.9%. Its operating profit target of 370 billion yen represents growth of 2.7%, showing that different measures of earnings are expected to move in different directions.

Citi, the bank assessing the results, expected an immediate negative stock market response to the quarterly shortfall. It said:

"Since July-September results came in below consensus, we expect the stock to react negatively near term," Citi wrote.

Citi also expected Zelda and other commercial activity to support a later recovery. The bank said:

"Given these growth drivers, we believe the shares will recover following a temporary correction," the bank said.

Nintendo's shares had already fallen almost 50% from their previous August highs. Shareholders will receive an interim dividend of 76 yen per share, up from 42 yen, while the annual forecast remains 162 yen, below the previous year's 219 yen.

The immediate business test is concrete: Nintendo must ship substantially more consoles during the second half while managing higher production costs. Strong game sales can support profit, but meeting the hardware forecast also requires more customers to accept the console's higher price.

Key Points

• Switch 2 shipments fell 41% to 2.67 million in July through September and 37.4% to 6.49 million over the first half.
• Quarterly operating profit fell 16% to 73.9 billion yen, while half year operating profit rose 49.1% to 216.5 billion yen.
• Software sales, digital spending and a US tariff refund supported the half year profit increase.
• Announced Switch 2 price increases added $50 in the US and 10,000 yen in Japan.
• Nintendo maintained annual targets of 16.5 million Switch 2 consoles and 60 million games.
• The company needs another 10.01 million console shipments before March 31, 2027, to meet its hardware target.