Nintendo is hoping key games such as Mario and Zelda will help it keep players interested in its ageing Switch console series.
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Nintendo reported a fall in profit and revenue in its fiscal year driven by a drop in sales of its flagship Switch console.
For its full fiscal year, which ran from April 2022 and ended Mar. 31 this year, Nintendo reported revenue of 1.6 trillion yen, meeting its own forecast. That was a 5.5% year-on-year decline.
Nintendo reported 432.7 billion yen in net profit for the fiscal year, down more than 9% year-on-year. However, it was better than the company’s own forecast of 370 billion yen.
The Japanese gaming giant sold 17.97 million units of its flagship Nintendo Switch console series, in line with its own forecast of 18 million units for the fiscal year. That compares to just over 23 million Switch units sold in the fiscal year ended Mar. 2022, a 22% decline.
Nintendo said “shortages of semiconductors and other components impacted production until around the end of summer” and the company “did not experience the growth in sales mainly during the holiday season” that it saw in the previous year.
For the fiscal year ended March 2024, Nintendo forecast sales of 15 million units of the Switch.
Nintendo is contending with an aging console with the Switch, which has been on the market for six years, with fears from investors that its sales may have peaked. The company was twice forced to slash its forecast for Switch sales in the last fiscal year after a disappointing holiday season.
Over the life of the Switch, Nintendo has tried to refresh the console with a handheld version and one with an improved screen. That has helped in the short term but has done little to arrest the overall trend of falling sales.
In contrast, rival Sony reported an all-time high profit for the year ended Mar. 31. The company also sold a record 19.1 million PlayStation 5 consoles in the financial year. Sony’s PlayStation 5 has only been on sale for just over two years, so it is still in its infancy.
Nintendo shares are up 3.6% this year while Sony’s stock has risen 25%.
Switch ‘passed its peak’
“The Nintendo Switch had a fantastic run but definitely passed its peak,” Serkan Toto, CEO of Tokyo-based games consultancy Kantan Games, told CNBC.
“Based on the forecast for the new fiscal (year), I would not expect any miracles but rather a company running on auto-pilot and fulfilling its duty towards existing Switch users. Every console cycle comes to an end eventually, and Nintendo, too, now needs a new piece of hardware to revitalize its sales.”
The key for Nintendo now is how it continues to rake in revenue from its 114 million annual paying users. The gaming giant has a strong range of games and recognizable characters from Pokemon to Mario.
However, Nintendo said software sales totaled 213.96 million units for the year ended Mar. 31, down 9% year-on-year.
Nintendo is set to release The Legend of Zelda: Tears of the Kingdom on Friday, one of its most popular franchises.
The company forecasts software sales of 180 million units in the current fiscal year, marking expectations of a further decline.
Nintendo said it expects net profit to fall 21.4% to 340 billion yen in the year ended Mar. 2024.