Nintendo’s shares fell sharply by around 11% after the Japanese gaming giant reported disappointing third-quarter earnings, triggering concerns about shrinking profit margins despite strong hardware sales.
For the quarter ended December 31, 2025, Nintendo’s operating profit came in below market expectations, even as revenue rose sharply year-on-year. The company benefited from robust demand for its newly launched Switch 2 console, which has already sold more than 17 million units, making it Nintendo’s fastest-selling console to date. However, higher production costs reduced overall profitability.
Investors were particularly worried about rising component costs, especially memory chips, which are squeezing margins on hardware sales. Analysts noted that while Nintendo has priced the Switch 2 competitively to drive volumes, this strategy has limited its ability to generate higher profits from console sales.
Concerns were also raised about the software pipeline, with fewer blockbuster game launches expected in the near term. Strong game releases are critical for improving margins, as software typically delivers higher profits than hardware. Without a steady flow of major titles, analysts fear Nintendo may struggle to maintain earnings momentum.
Adding to investor disappointment, Nintendo maintained its full-year profit forecast, which remains below market estimates. The lack of an upgrade signalled management caution about the months ahead, even after a strong holiday sales season.
The sharp fall in Nintendo’s stock pushed it to its lowest level since April 2025 and weighed on broader market sentiment. Analysts said the reaction reflects growing scepticism over whether Nintendo can balance volume growth with profitability in a competitive and cost-inflationary environment.
Despite the sell-off, some market watchers remain positive on Nintendo’s long-term prospects, citing its strong brand, loyal customer base and successful console launch.
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