(May 11): Nintendo Co’s shares plunged the most in three months after the company forecast hardware and software sales declines and warned that the soaring cost of memory chips was hitting margins.
The Kyoto-based games maker on Friday released a surprisingly downbeat projection of 16.5 million sales of its Switch 2 console this fiscal year, accompanied by 60 million software copies. The company’s stock price fell 10% in Tokyo on Monday to its lowest since August 2024, when sales momentum for the original Switch decelerated.
The rising cost of memory and storage components is weighing on electronics brands like Nintendo and fellow games console maker Sony Group Corp as they also navigate tariffs, high shipping costs and lacklustre discretionary spending. But Nintendo has yet to recreate the huge game sales of the original Switch’s early days.
“There is cause for concern here that goes beyond hardware cost issues,” said Amir Anvarzadeh of Asymmetric Advisors. “As markets ponder the fate of its hardware margins, Nintendo’s software sales — the key to its profits — are starting to notably sputter, reflecting weaker pull from its franchises.”
Nintendo, which expects a ¥100 billion impact on its business from memory prices and US tariffs this year, announced across-the-board price hikes spanning the Switch 2, the original Switch, online subscriptions and playing cards.
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Sony on Friday said it’s secured the memory it needs for the PlayStation 5 for the calendar year and that it expects to limit the impact from such rising input prices at its consumer electronics arm — which does not include games — to around ¥30 billion for the fiscal year. Sony’s shares rose 10% after it announced a buyback and a joint venture with Taiwan Semiconductor Manufacturing Co to help lower capital costs.
For Nintendo, whose shares are down more than 30% since the start of the year, concerns are growing about the slow pace of game launches since the Switch 2’s debut in June.
“Investors focus chiefly on what the summer showcase season might bring that might help shore up investor confidence,” said Bernstein analyst Robin Zhu. “Nintendo’s first-party pipeline remains the key.”
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Following Nintendo’s price announcement, long lines for the Switch 2 formed at electronics stores across Japan, with inventory at many online and physical retailers evaporating over the weekend. Demand for the hardware remains robust, with analysts saying that Nintendo is perhaps being overly conservative.
“Why would Nintendo issue guidance for declining software sales when they should be ramping up user activity in the console’s crucial second year?” Morningstar analyst Kazunori Ito said. “It’s baffling.”
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