Nintendo Co. cut its full-year earnings and revenue outlook, underscoring uncertainty around its aging Switch console and the global gaming environment.
(Bloomberg) — Nintendo Co. cut its full-year earnings and revenue outlook, underscoring uncertainty around its aging Switch console and the global gaming environment.
The Kyoto-based company missed console sales targets toward the year’s end, a sign the Switch is flagging after a six-year run despite a consistent pipeline of software hits. It now expects operating income of 480 billion yen ($3.6 billion) for the year ending March, down from 500 billion yen previously. It’s projecting net sales of 1.6 trillion yen, down from 1.65 trillion yen.
Investors are focusing on the Switch’s sales momentum in the coming fiscal year. Nintendo has sat out a broader rally in tech stocks this year and may remain stuck in the doldrums until it unveils a successor to the Switch, which has seen sales declining over the past two years. The company expects to end the year with about 18 million consoles sold, down from an earlier 19 million target.
On Tuesday, President Shuntaro Furukawa deflected questions about whether Nintendo will unveil a successor to its signature device, saying he believed there was still strong demand for the Switch out there.
“The outcome was weak and that’s a surprise. The year-end holiday season suggested sales of hardware weren’t that strong despite amplified supply, which also weakened sales of software,” Toyo Securities analyst Hideki Yasuda said. “It’s now clear that the Switch’s momentum is downward.”
The global gaming industry is grappling with uncertainty about demand in 2023, when stubbornly high inflation and a potential recession may crimp spending on entertainment.
Take-Two Interactive Software Inc., the video game publisher known for the best-selling franchises Grand Theft Auto and Red Dead Redemption, cut its outlook for bookings in fiscal 2023 and gave a disappointing forecast for the current quarter. At the same time, Activision Blizzard Inc. reported bookings that beat analysts’ estimates on the strength of a new Call of Duty release as well as several other big titles.
Many investors had expected Nintendo to increase its guidance thanks to twin games Pokémon Scarlet and Pokémon Violet, which became the fastest-selling Nintendo games in the company’s history. The company reported operating profit of 190.2 billion yen and sales of 638.2 billion yen in the December quarter, both weaker than average estimates.
The downgrade came despite strong sales of the twin titles, released in November. And only weeks earlier, Splatoon 3 had set a new high for fastest domestic sales in Japan. Foreign currency volatility played a role in the lowered forecasts, Nintendo said.
Read more: Nintendo Plans to Boost Switch Output to Meet Resilient Demand
Nintendo may be able to fire up sales with new special editions of Switch, Yasuda has said, tying in with blockbuster launches such as the latest Legend of Zelda installment.
“If Nintendo prepares at least two special editions, it can still sell more than 20 million units in the next fiscal year,” Yasuda said. “Without that, sales would be 18 million or fewer, which, to be honest, is still strong for hardware of that age.”
–With assistance from Vlad Savov.
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