Nintendo Q1 FY2027: Operating Profit Jumps 150% on Switch 2 Boost
Revenue
¥517.8B
-9.5%
Full-year forecast
¥2.0T
Operating Profit
¥142.6B
+150.5%
Full-year forecast
¥370.0B
Net Income
¥147.4B
+53.5%
Full-year forecast
¥310.0B
Operating Margin
27.5%
Nintendo's fiscal first-quarter revenue slipped 9.5% to ¥517.8 billion, but operating profit surged 150.5% to ¥142.5 billion, boosted by strong Switch 2 software sales and a U.S. tariff refund. Net profit increased 53.5% to ¥147.4 billion.
Results Highlights
Nintendo reported revenue of ¥517.8 billion (down 9.5% year on year) in the April-June quarter, but operating profit soared to ¥142.5 billion (up 150.5%), recurring profit reached ¥206.1 billion (up 115.1%), and net income attributable to owners of the parent climbed to ¥147.4 billion (up 53.5%).
The revenue decline reflects a pullback from the previous year's surge and the planned pace of Nintendo Switch 2 hardware shipments. However, profitability improved sharply: a higher mix of software sales and a refund of U.S. IEEPA tariffs booked as cost-of-sales reductions pushed the cost-of-sales ratio down, driving operating profit up more than 2.5 times.
Nintendo Switch 2 hardware sold 3.82 million units and software 9.46 million units in the quarter. The original Switch sold 0.66 million hardware units and 33.81 million software units, supported by backward compatibility with Switch 2. The April release "Tomodachi Collection: Exciting Life" sold 7.94 million copies, propelling overall software sales.
Digital sales jumped 90.0% to ¥132.7 billion, driven by higher download ratios for packaged titles. IP-related revenue—including the hit film "The Super Mario Galaxy Movie"—doubled 107.4% to ¥34.8 billion. A weak yen added foreign exchange gains of ¥16.8 billion, equity-method profits of ¥30.3 billion, and interest income of ¥13.1 billion.
Segment Performance
Nintendo operates as a single segment but revenue breaks down into dedicated game platforms, digital business, and IP income.
Dedicated game platforms: Switch 2 hardware sales reached 3.82 million units and software 9.46 million units. Original Switch hardware sold 0.66 million units, but its software remained resilient at 33.81 million units, aided by backward compatibility. The standout title "Tomodachi Collection: Exciting Life" sold 7.94 million units, leading the software lineup. The higher software mix lifted gross margins.
Digital business: Downloadable games and add-on content drove digital revenue to ¥132.7 billion (up 90.0%), led by higher download ratios for titles also sold physically. Subscription and online services provided steady income.
IP-related income: Revenue doubled to ¥34.8 billion (up 107.4%), fueled by the global success of "The Super Mario Galaxy Movie". Theme park and licensing income also contributed. Overseas sales accounted for 77.9% of total revenue.
Full-Year Outlook
Nintendo left its full-year FY2027 forecasts unchanged: revenue of ¥2,050.0 billion (down 11.4% from FY2026 actual of ¥2,954.0 billion), operating profit of ¥370.0 billion (up 2.7%), recurring profit of ¥430.0 billion (down 20.7%), and net profit of ¥310.0 billion (down 26.9%).
Major Switch 2 titles scheduled for the second half include "Splatoon Raiders" (July), "Fire Emblem: Many Flowers" (September), "Nintendo Switch Sports Resort" (October), and "The Legend of Zelda: Ocarina of Time" (within 2026). These, along with continued sales of existing games, are expected to accelerate Switch 2 adoption.
The annual dividend forecast is ¥162.00 (down from ¥219.00 in FY2026), maintaining a twice-yearly payout policy while aligning returns with earnings.
Financial Position and Capital Policy
Total assets at quarter-end stood at ¥3,815.8 billion (up ¥10.5 billion from fiscal year-end), net assets at ¥2,918.9 billion (down ¥36.2 billion), and the equity ratio at a robust 76.5%. Cash and deposits totaled ¥1,544.0 billion, with marketable securities of ¥423.8 billion, ensuring ample liquidity.
Inventories rose to ¥618.0 billion (up ¥78.2 billion), signaling build-up ahead of second-half demand. Notes and accounts payable also increased, reflecting active procurement. The company maintained its dividend policy but disclosed no changes to share buyback plans during the quarter.
Risks and Challenges
Nintendo highlighted several risk factors in its earnings outlook.
Foreign exchange risk: With 77.9% of sales overseas, a sharp appreciation of the yen could hurt results.
New hardware adoption: Switch 2 is off to a good start, but competitive products or market saturation could slow momentum.
Tariff policy changes: The U.S. IEEPA tariff refund boosted profit this quarter, but future tariff hikes or trade friction could raise costs.
Software hit dependency: The business relies heavily on blockbuster titles; underperformance or delays would impact earnings.
Market competition: The rise of cloud gaming and mobile platforms could reshape the dedicated console market.
Analyst take
Nintendo's Q1 showed a clear structural shift toward higher-margin software and digital sales, even with a one-time tariff refund flattering operating profit. The Switch 2 software lineup is driving a richer mix, while the movie IP success adds a new growth lever. However, the full-year guidance implies a retreat in recurring and net profit, reflecting likely normalisation of non-operating gains. The dividend cut signals a pivot to reinvestment early in the Switch 2 cycle, which could underpin medium-term value. Currency swings and holiday software performance will determine whether full-year targets are met.