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Nintendo warns of rising costs as Switch 2 sales slow
Developed over time first seen 3 months ago
Nintendo reported that Switch 2 console sales fell by 34.4 per cent year on year to 3.82 million units in the latest quarter, but said demand remained healthy thanks to new game releases. The decline matters because the company plans to raise the US console price from $450 to $500 in September, while higher component costs and tariffs could put further pressure on sales and profitability.
Total Switch 2 sales have reached 23.68 million, ahead of the original Switch’s pace, and Nintendo has retained its forecast of 16.5 million console sales for the fiscal year ending next March. Strong software sales helped it exceed revenue expectations, including 7.96 million copies of Tomodachi Life: Living the Dream in three months, while tariff refunds added about $300 million; Nintendo also expects rising memory prices and tariffs to add roughly 100 billion yen ($633 million) to costs.
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In short
- Switch 2 quarterly sales fell 34.4 per cent, but Nintendo remains confident.
- A US price rise and higher costs could weaken demand.
- Strong games and tariff refunds supported Nintendo’s revenue.
How this story developed
- 3 months ago Nintendo followed up by disclosing that surging memory chip prices and tariffs are now expected to add roughly 100 billion yen ($633 million) in costs, even as it maintained it was not yet worried and left its 16.5 million unit sales target untouched.
- 3 months ago Nintendo reported that Switch 2 hardware sales dropped 34.4% year-on-year to 3.82 million units last quarter, but held its full-year forecast at 16.5 million units and pointed to strong software performance and $300 million in US tariff refunds as the price rise to $500 approaches on 1 September 2026.
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The case for
Nintendo faces genuine structural cost pressures from tariffs and component prices, with costs rising by approximately 100 billion yen. The company maintains that demand remains healthy despite the year-on-year decline, which it attributes to quarterly fluctuations and new release timing. Strong software sales and ahead-of-pace lifetime sales suggest the Switch 2 ecosystem remains robust, justifying investment protection through pricing adjustments that align with increased production costs.
The case against
The 34.4 per cent year-on-year sales decline suggests demand is weakening, making a price increase from $450 to $500 strategically risky. Raising prices whilst sales are falling typically accelerates demand destruction, particularly amongst price-sensitive consumers. Though tariffs explain some cost increases, passing these entirely to consumers during a slowdown may prove counterproductive, potentially driving market share to lower-priced competitors and undermining the long-term installed base Nintendo needs for software profitability.
Explained simply
Nintendo is the Japanese company behind the Switch games console, and its latest financial results show the follow-up machine, the Switch 2, selling more slowly than before after a huge launch. The firm has also warned that the cost of components such as memory chips, plus US tariffs, will add hundreds of millions of dollars to its expenses.
The Switch 2 launched in 2025 as the successor to the original Switch, one of the best-selling consoles ever, and quickly became a hit in its own right thanks to games such as Mario Kart World and Donkey Kong Bonanza. Nintendo's results matter because they show how a major games maker is being squeezed by global supply costs and trade tariffs even while its hardware and software continue to sell strongly worldwide.
The company is a bellwether for the wider video games and consumer electronics industry, so its cost warnings and sales figures are watched closely by investors, rival manufacturers and gamers alike, particularly as Nintendo prepares to raise the Switch 2's US price later this year.
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Originally published by Engadget as “Nintendo’s Switch 2 console sales just dropped significantly”.