Nintendo reported quarterly revenue growth of 86% year-on-year but fell short of consensus expectations, triggering a more than 10% sell-off in Tokyo trading. Despite the revenue miss, net profit climbed 24% versus the prior year, driven by ongoing strength in Switch sales. Investors reacted sharply to the top-line shortfall, marking the largest single-day share decline for the company in over two years.

The company warned that an unprecedented global shortage of memory chips has led to a significant increase in component costs. While management indicated that elevated memory prices have not yet materially dented fiscal-year profits, they cautioned that sustained high costs could erode margins if supply remains constrained. Ortus Advisors’ head of Japanese Equity Strategy highlighted investor concerns that rising input costs may limit Nintendo’s ability to reinvest in R&D and marketing.

Nintendo maintained its full-year Switch 2 unit sales forecast at 19 million, reflecting confidence in the console’s long-term appeal despite near-term supply challenges. The company’s upcoming release schedule includes ‘Mario Tennis Fever’ in February and ‘Pokémon Pokopia’ in March, with hopes that new software will drive hardware upgrades. Additionally, the April release of ‘The Super Mario Galaxy Movie’ is expected to deliver a promotional boost similar to the first film’s impact on Switch sales.

On February 3, Macquarie raised its rating on Nintendo to Outperform, citing over 50% net profit growth in the nine months to December and strong cash generation from Switch 2 momentum. Nintendo’s debt-to-equity ratio stands at a conservative 0.018, underscoring minimal leverage and ample financial flexibility. The upgrade reflects confidence that the company’s robust balance sheet and popular franchises will help weather near-term cost headwinds.