Goldman Sachs: Nintendo’s second-quarter game sales were strong, but console shipments and profit were below expectations

Software sold well—so why was profit still below expectations?

Nintendo’s operating profit for the fiscal second quarter ended September 2026 was 73.9 billion yen, below Goldman Sachs’ forecast of 88.6 billion yen and Bloomberg’s market consensus of 88.8 billion yen.
Combined software shipments for the Switch and Switch 2 platforms were 46.94 million copies, above Goldman Sachs’ forecast of 40.3 million copies. Switch 2 software shipments were 15.03 million copies, exceeding the firm’s forecast of 9.5 million copies. The company said overall user activity on the platforms was robust and third-party games also performed strongly.
Despite software sales exceeding expectations, quarterly gross profit was 27.5 billion yen below Goldman Sachs’ forecast. Goldman Sachs believes the main reason was the sales mix between first-party and third-party games.

Switch 2 shipments to distribution channels in the second quarter were 2.68 million units, below Goldman Sachs’ forecast of 3.1 million units. The firm noted that sell-through declined after the console price increase, so it lowered its shipment forecast for the fiscal year ending March 2027 from 17.4 million units to 15.7 million units.
Nintendo said Switch 2 hardware profitability in the second quarter was broadly unchanged from the first quarter, but it expects higher memory costs to become more pronounced in the second half of the fiscal year. Goldman Sachs’ model still assumes that hardware memory costs will rise year over year to 2.5 times in the current fiscal year and to 4.5 times in the following fiscal year, ending March 2026.
The company kept its guidance for the fiscal year ending March 2027 unchanged. Goldman Sachs believes the market will focus on the likelihood of achieving the second-half shipment target of 10 million Switch 2 units.

Goldman Sachs cut its operating profit forecast for the fiscal year ending March 2027 from 428.3 billion yen to 401.8 billion yen, a reduction of about 6%. Its forecasts for fiscal years from 2028 through March 2031 were lowered by 2% to 7%.
The resilience of software sales led the firm to raise its assumption for software sales per console: even after lowering its console adoption forecast, it increased its software shipment forecast for Switch 2 in the current fiscal year from 57.45 million copies to 62.21 million copies.
Goldman Sachs believes console adoption and profitability can continue to advance over the medium to long term as the lineup of games designed for Switch 2 expands. It maintained its Buy rating and 9800 yen 12-month price target. Key constraints include delays to major game releases, console sales falling short of forecasts, and component costs rising more than expected or price increases taking longer to pass through.