Nintendo Co. hit a new high for first-quarter profit after the successful launch of its latest Legend of Zelda game propped up sales of its Switch console.
(Bloomberg) — Nintendo Co. hit a new high for first-quarter profit after the successful launch of its latest Legend of Zelda game propped up sales of its Switch console.
The Kyoto-based company reported operating profit of ¥185.44 billion ($1.3 billion), surpassing analyst estimates and its previous April-June quarterly high of ¥144.7 billion, set in 2020. Sales were ¥461.34 billion, up 50% from a year earlier.
Powering the strong figures was The Legend of Zelda: Tears of the Kingdom released to widespread critical acclaim in May. The latest installment sold more than 10 million copies in its first three days and is already the ninth-best-selling title in Switch history with 18.51 million units, the company said on Thursday. The Super Mario Bros. Movie also helped nearly triple Nintendo’s licensing royalties, with global box office receipts of $1.35 billion since opening.
Nintendo upheld its forecast for the fiscal year of ¥450 billion operating profit and ¥1.45 trillion in sales, despite earning more than a third of those in the first three months. Playing users in the year to June 2023 were the highest ever at 116 million, the company said.
“The Zelda game has legs and will continue to sell well through 2024,” said industry analyst Serkan Toto. “For the Mario movie, Nintendo was apparently able to squeeze more revenue out of its deal with partner Illumination than the typical Hollywood standard.”
The outstanding question for the company is what further steps it will take in the coming months to sustain momentum. It has not announced any marquee games for the rest of the fiscal year through March, relying on established titles for the critical year-end shopping season. Rival console makers Sony Group Corp. and Microsoft Corp. are gearing up for that period with ample hardware supply and major game releases in the works.
What Bloomberg Intelligence Says
Nintendo’s 57% net-profit beat for fiscal 1Q backs our view that Zelda’s record-breaking sales could power the Switch maker’s fiscal 2024 profit to surpass consensus by a single-digit percentage, despite the company’s own gloomy internal guidance, which is driven by Switch’s maturity and a soft game pipeline. The Legend of Zelda: Tears of the Kingdom sold more in its first two months than its predecessor sold in its first four years.
— Nathan Naidu, BI analyst
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The Switch was released in 2017 and Nintendo President Shuntaro Furukawa has said sustaining its momentum will not be easy. The company has so far declined to discuss a successor to its flagship console, more than two years after Sony and Microsoft refreshed their hardware.
(Updates with BI analyst quote)
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