Nintendo Co. expects to sell 15 million units of its Switch console this fiscal year, showing the extent of the slowdown for its six-year-old flagship product.
The Kyoto-based games maker’s guidance falls shy of an average analyst estimate of 15.7 million units, which already took into account a deceleration in hardware sales in recent months. The company also forecast operating income of ¥450 billion ($3.3 billion) this fiscal year, versus the ¥455.3 billion average estimate.
Nintendo on Tuesday said it sold 17.9 million Switch units in the year to March and reported operating profit of ¥93.8 billion for the quarter on Tuesday. Analysts had expected that it would report an operating profit of ¥83.4 billion.
The hybrid Switch console, released in 2017, is slowing down more quickly than the company had once anticipated. President Shuntaro Furukawa has described the holiday season as disappointing, telling analysts that sales were affected by the sluggish global post-Covid reopening and the economic malaise brought about by inflationary pressure.
The poor holiday performance came even with a pair of record-setting debuts — Splatoon 3 in September and Pokémon Scarlet and Violet in November — suggesting the market for Nintendo’s hardware is close to saturated.
The company lacked a blockbuster release in the first quarter, though it plans to release a much-anticipated sequel to The Legend of Zelda: Breath of the Wild this Friday and also got a tailwind from the April opening of The Super Mario Bros. Movie, a well received collaboration with animation studio Illumination.
Still, hardware sales are unlikely to rebound now that Nintendo faces rising competitive pressure from Sony Group Corp., which is finally able to ramp up production and deliveries of its PlayStation 5 and aims to sell more than 25 million units this year.
Read more about Sony’s most recent earnings report and outlook for the current year
Analysts don’t foresee Nintendo being able to bolster sales of the Switch with hit games the way it has done in the past and, moreover, the company isn’t expected to release a successor console for at least another year.
“We expect Nintendo will not release the next-generation hardware over the next 12 months,” UBS Securities analyst Kenji Fukuyama said in a letter to clients ahead of the earnings report. “Nintendo’s valuation is very likely to shrink until the launch of the new hardware.”
Nintendo shares were given a boost this year by Saudi Arabia’s Public Investment Fund, which built up its position in the company to 8.3%, making it the largest external shareholder.
Read more: Saudi Wealth Fund Now Nintendo’s Largest Outside Shareholder