Revenue declines but profits soar
Nintendo’s latest financial results for the first quarter of fiscal 2027 have surprised many in the industry. The company reported net sales of $3.25 billion, a 9.5% decrease from the same period last year. That drop was largely due to the tough comparisons following the launch of the Switch 2. However, the company’s operating profit more than doubled to $894 million, a huge jump of 150%. Much of that profit boost can be attributed to $300 million in tariff refunds. But even beyond that, Nintendo has shown it is running the business more effectively during a time when it would normally be dealing with the challenges of a new hardware cycle.
The contrast between lower revenue and higher profit is clear evidence that Nintendo is transforming the way it operates. The company is no longer just relying on hardware sales to drive the bottom line. Instead, it is combining strong software performance with its growing focus on digital distribution. These steps are helping the company stay profitable even as it transitions to a new generation of hardware.
Switch 2 sales remain resilient
The next-gen Switch model, the Switch 2, continued to sell well during the quarter. It sold 3.82 million units, taking the system’s lifetime sales to 23.68 million. That’s a solid performance for a non-launch quarter, especially when you consider the difficult economic environment and the high expectations set for the device. Analysts suggest that the demand might be growing because consumers are preparing in advance for potential price increases, particularly in key markets such as the United States.
The Switch 2 has now sold more than the Nintendo GameCube and is rapidly approaching the Nintendo 64 in terms of total units. Meanwhile, the original hybrid Switch is still performing well, with 660,000 more units sold in the quarter. Its lifetime sales have reached 156.59 million, bringing it dangerously close to the PlayStation 2’s record for the best-selling console of all time. Unless Sony makes a last-minute surprise with some hidden stock, the PS2 may finally be dethroned.
Software delivers big wins and small misses
The software side of Nintendo’s business paints a mixed picture. The company sold 9.46 million units of software for the Switch 2 and 33.81 million units for the original Switch during the quarter. The shift to digital is continuing to gain momentum, as 61.5% of all software sales now come through digital channels. This includes downloadable content, subscriptions, and in-game purchases, which are becoming a larger part of the company’s revenue mix.
One standout success was Tomodachi Life, which sold 8 million units. The title is already being compared to the massive hit of Animal Crossing: New Horizons. However, not every release hit the mark. Key titles like Star Fox and Yoshi and the Mysterious Book both missed the one-million unit mark, which was a letdown for both the company and its fanbase. Another recent release, Mario Tennis Fever, launched in February and is struggling to connect with players.
While Nintendo described these underperforming titles as having 'steady' sales, the lack of major hits is a concern for some investors. These are established franchises with high expectations. Their performance could signal potential struggles for Nintendo as it tries to keep delivering blockbusters in an increasingly competitive landscape.