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Shares of Nintendo (NTDOY) have surged by over 40% on a year-to-date basis, reflecting robust market enthusiasm for today's Switch 2 launch, following a challenging year for the gaming company. That enthusiasm is fueled by expectations of strong demand, with retailers like GameStop (GME) and Best Buy (BBY) anticipating sell-outs on launch day. Pre-order data from Japan alone, with 2.2 mln applications, underscores the pent-up demand for the successor to the original Switch, which has sold over 150 mln units since 2017. This fervor suggests NTDOY is poised to capitalize on its loyal customer base and potentially expand its market share, provided supply constraints do not hinder initial momentum.

• The Switch 2 is pivotal for NTDOY’s future, as the company’s growth trajectory hinges almost entirely on this product’s success. In FY25 (ended March 31, 2025), the company faced significant headwinds, with net sales declining 30.3% yr/yr to ¥1.16 trillion ($8.3 bln) and operating profit plummeting 46.6% to ¥282.5 bln ($1.9 bln). This downturn was exacerbated by a 31.2% drop in original Switch hardware sales to 10.8 mln units, likely due to consumers deferring purchases in anticipation of the Switch 2.
• These figures highlight the urgency for NTDOY to deliver a successful console launch to reverse declining hardware and software sales trends, which have been further pressured by a lack of major first-party title releases in FY25.
• NTDOY forecasts 15.0 mln Switch 2 hardware units and 45.0 mln software units sold in FY26, a projection some analysts view as conservative given the eight-year gap since the original Switch’s debut. The pent-up demand, coupled with backward compatibility and enhanced hardware capable of supporting AAA titles (games with the highest development budgets and production values), positions the Switch 2 to potentially exceed these targets.
• A successful launch should transform NTDOY’s financials in FY26 and beyond, with the company projecting a rebound in net sales to ¥1.9 trillion (+63% yr/yr), driven by high-margin software sales and a robust first-party title lineup, including potential blockbusters like new Mario or Zelda games. The console’s ability to attract both existing Switch owners and new demographics, particularly with mature titles, could sustain long-term growth.
• However, concerns linger regarding the Switch 2’s $450 price point, a significant increase from the original Switch’s $299 launch price. Potential U.S. tariffs and rising logistics costs could force NTDOY to raise prices further, risking reduced accessibility and dampening longer-term sales potential, especially in price-sensitive markets. Mitigating this, the Switch 2 offers notable upgrades, including a custom NVIDIA (NVDA) GPU for smoother gameplay, sharper visuals, and AI-driven enhancements.
• NTDOY’s planned release of a lower-priced Switch 2 variant in 2026 could also broaden its appeal, driving higher software sales, which typically yield 70–80% gross margins compared to hardware’s 30–40% (or lower) gross margin, thus bolstering profitability.
• The Switch 2 launch is set to invigorate the broader gaming ecosystem. Retailers like GME and BBY will see revenue spikes from console, game, and accessory sales. Third-party publishers, including Electronic Arts (EA), with three titles planned, Take-Two Interactive (TTWO), and others like Ubisoft and Square Enix, are also poised to capitalize.

Switch 2 carries lofty expectations as a potential game-changer for NTDOY, with the capacity to reverse FY25’s financial declines and drive robust growth in FY26 and beyond. A successful launch, supported by strong demand and strategic pricing adjustments, could significantly enhance NTDOY’s profitability while providing a meaningful boost to retailers, game developers, and hardware partners like NVDA.