Nintendo Co. raised its annual profit forecast though the outlook fell short of projections, reflecting uncertainty around game spending and a volatile yen.
The Kyoto-based entertainment company said it now expects operating income of ¥500 billion ($3.3 billion), up from ¥450 billion previously. It based its new guidance on a weaker yen value than previously, though it fell short of average analyst expectations of ¥529 billion. The company also said it expects to sell 5 million more copies of games, raising its forecast to 185 million.
Nintendo reported operating profit of ¥94.5 billion and revenue of ¥334.9 billion in the September quarter, both beating analyst expectations. The yen’s weakness helped the earnings, the bulk of which comes from overseas.
“The Switch is different from past hardware,” Nintendo President Shuntaro Furukawa said on a conference call after the earnings release. “It has the ability to give rise to different kinds of new demand.”
The company kept the outlook for its signature hardware unchanged, at 15 million units in the year through March, though Furukawa said that goal would be hard to accomplish. Now more than six years old, the Switch has sustained its popularity with the help of game-themed custom editions and a regular flow of in-house blockbuster titles drawing new users to the platform.
Furukawa declined to comment on any plans for a Switch successor. The handheld-hybrid console faces stiff competition from next-generation machines from Microsoft Corp. and especially Sony Group Corp., whose PlayStation 5 has been the best-selling console in the US this year, according to data from Circana, formerly NPD. Nintendo’s shares are up 15% this year, though still lag its larger competitors who have renewed their offerings.
What Bloomberg Intelligence Says
Nintendo’s upgraded fiscal 2024 sales and profit metrics are most likely driven by better-than-expected sales from new software based on its key franchises such as Zelda, Pokemon and Mario, supported by a weaker yen that drove 6.6% of FY2023’s pretax profit. FY2024 sales and net profit are still expected to fall 1.4% and 3%, vs. 9.5% and 21.4% earlier.
— Nathan Naidu, BI analyst
The successful launch of The Super Mario Bros. Movie in April may provide a tailwind for Nintendo’s software library and hardware sales, as the company also launched a new game in the Mario franchise recently. Its crimson-red Super Mario special edition Switch console doubled sales in Japan upon its debut in October. This month, Nintendo added to its initiatives to expand its audience by doing video game events at nursing homes in Japan.
“This must be any video game console’s best final year in the market ever, driven by the latest Pikmin and Zelda releases as well as the Mario movie,” industry analyst Serkan Toto said. “Despite Nintendo upgrading its forecast, they are still lowballing in terms of software in particular. They still have more than enough blockbusters lined up in the coming months to make sure the Switch’s fire continues to burn.”
The surge in artificial intelligence technology is likely to greatly benefit game platforms including Microsoft’s Xbox and Sony’s PlayStation, who’ll be “the most clear-cut beneficiaries” in the games industry, Morgan Stanley analysts led by Matthew Cost wrote last month. Nintendo has less upside from AI adoption, but also faces low risk of disruption, they added.
--With assistance from Vlad Savov.
(Updates with CEO quote)