Nintendo stands by profit forecast as Switch 2 sales face durability test

Core Viewpoint - Nintendo has reaffirmed its annual operating profit forecast of 370 billion yen (approximately $2.4 billion), indicating confidence in the current console cycle despite concerns about the sustainability of early demand for the Switch 2 [1] Switch 2 Momentum in Focus - The Switch 2, which succeeded the original Switch, has seen robust early sales, but investors are questioning whether this demand can be maintained post-launch [1] - The pricing strategy shows a significant difference, with the Switch 2 priced at $449.99 in the U.S. compared to 49,980 yen (about $320) in Japan, reflecting inflation and higher operating costs [1] - Nintendo's positioning of the Switch 2 as a mass-market device limits its ability to increase prices significantly without risking demand [1] Trade Tensions and Supply Risks - Nintendo's hardware business is affected by external factors, including supply chain disruptions due to U.S. trade policies and rising memory chip prices driven by AI investments [1] - The company is better positioned than many competitors to absorb these cost pressures in the short term [1] Pricing Discipline and Margins - Concerns exist regarding the potential decrease in profitability for the Switch 2 as input costs rise, but Nintendo's long-standing policy of not selling hardware at a loss is seen as a stabilizing factor [1] - The higher U.S. price helps protect margins, but further cost increases may be difficult to pass on without affecting demand [1] Games Pipeline Under Watch - The strength of Nintendo's software pipeline is critical, with concerns about the lack of immediate high-profile releases from major franchises like The Legend of Zelda [1] - The upcoming release of Mario Tennis Fever is expected to support engagement and sales, but the pace of major title rollouts will be closely monitored as it impacts long-term console demand [1]