Nintendo’s shares declined about 7% in Tokyo on Monday after releasing their full-year results. Despite a record-breaking fiscal year, the company issued a cautious outlook for the year ahead, which unsettled investors. Since the start of 2026, Nintendo’s stock has fallen nearly 30%, reflecting concerns over future growth and margins.

Strong Fiscal Year Masks Future Challenges

Nintendo’s FY26, which ended in March, was its best ever. Revenue nearly doubled to ¥2.31 trillion, and net profit increased by over 50% to ¥424 billion. The launch of the Switch 2 in June 2025 contributed significantly to this success, marking the largest console release in Nintendo’s history by units sold. However, the positive numbers were paired with a more cautious outlook for FY27.

For the upcoming year, Nintendo expects revenue to decline by about 11.4% to ¥2.05 trillion, with net profit dropping nearly 27% to ¥310 billion. The company projects hardware sales of 16.5 million units for the Switch 2, which is nearly 17% lower than FY26. This softer forecast is mainly due to higher costs for memory chips, increased shipping expenses, and US tariffs on Asian-made electronics.

Price Hikes and Cost Pressures

The Switch 2 will see a price increase, with the US price rising to $499.99 from $449.99 starting in September. In Japan, the console will go up to ¥59,980 from ¥49,980 in late May. These hikes are driven by rising costs for key components like memory chips, which have gone up around 41% from launch. NAND flash memory costs have also increased by approximately 8%.

The higher costs are linked to the global AI chip shortage, which has caused memory prices to skyrocket. Foundries are struggling to meet demand, affecting not just Nintendo but other tech giants like Sony and major PC and smartphone makers. Sony, for example, raised the price of its PS5 earlier this year. Nintendo is now following suit, attempting to recover margins amid these supply chain issues.

Pipeline and Market Outlook

One concern is the game lineup for the next year. The Switch 2 launched with popular titles and Nintendo’s existing franchises, but the coming months look light on big releases. There’s no confirmed new Zelda or Mario game in the pipeline, and third-party developers haven’t yet delivered exclusive titles that could boost hardware sales.

This has led some analysts to worry that the console might follow the typical decline curve, where demand drops early without enough high-profile games. However, Nintendo’s president, Shuntaro Furukawa, has suggested that the slower release schedule is intentional, and that the second half of FY27 could bring titles strong enough to sustain sales and software attach rates.

The broader competitive landscape also plays a role. Microsoft’s next Xbox is reportedly delayed, and Sony has hinted that the PS6 might not arrive until 2028 or 2029, mainly due to ongoing memory-cost issues. This gives Nintendo a longer window to expand its install base without immediate competition, which could be a strategic advantage if it manages to keep its momentum.

On the downside, Nintendo’s traditional cycle relies heavily on regular first-party hits. The company has historically managed this well, but the current outlook suggests the next year may be lighter than usual. This raises questions about whether Nintendo’s development cycle is changing or if the Switch 2 is hitting an early lull. The next few quarters will reveal which is the case.

Currency movements add another layer of complexity. The yen has appreciated modestly, reducing some of Nintendo’s previous foreign exchange gains. Their FY27 guidance assumes a stable or slightly weaker yen, which could mean higher reported revenue if the currency weakens again, but it also impacts costs when purchasing components.

In Japan, the price of the Switch 2 will jump from ¥49,980 to ¥59,980 in two weeks, a 20% increase. In the US, the price will rise by 11%, from $449.99 to $499.99. Both moves make the console significantly more expensive than the original Switch at launch. Whether consumers will accept these higher prices depends on Nintendo’s brand strength and upcoming software support, which will be key over the next year.

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