Memory Crunch Sends Nintendo Shares Deeper Into Bear Market

Nintendo shares plunged deeper into bear-market territory Monday after the company's full-year operating income forecast missed Bloomberg Consensus estimates. Traders were spooked on soft Switch 2 hardware and software guidance, and the margin squeeze from surging memory-chip costs continues to weigh on earnings, first pointed out by Goldman in late Decemeber.

Nintendo forecast 16.5 million Switch 2 console sales and 60 million software copies this year, disappointing Wall Street analysts who were expecting a much stronger forecast after the console's launch nearly one year ago. The company warned that memory prices and tariffs could hit the business by about ¥100 billion ($640 million), prompting price hikes of the handheld gaming device.

Nintendo's fourth-quarter results were mixed (courtesy of Bloomberg):

• Operating income 59.72 billion yen, +71% y/y, estimate 74.78 billion yen

• Net income 65.19 billion yen, +57% y/y, estimate 63.44 billion yen

• Net sales 407.17 billion yen, +95% y/y, estimate 415.46 billion yen

Asymmetric Advisors analyst Amir Anvarzadeh told clients, "There is cause for concern here that goes beyond hardware cost issues," adding, "As markets ponder the fate of its hardware margins, Nintendo's software sales — the key to its profits — are starting to notably sputter, reflecting weaker pull from its franchises."

Goldman analyst Maho Kamiya warned clients about the memory crunch hitting Nintendo's margins as far back as late December. As a result, Nintendo has raised the US price of the Switch 2 to about $500.

Nintendo's 2027 outlook also disappointed analysts, coming in well below estimates across nearly every metric (courtesy of Bloomberg):

Sees operating income 370.00 billion yen, estimate 480.29 billion yen (Bloomberg Consensus)

Sees net income 310.00 billion yen, estimate 420.12 billion yen

Sees net sales 2.05 trillion yen, estimate 2.52 trillion yen

• Sees Switch 2 hardware sales 16.50 million units
• Sees Switch 2 software sales 60.00 million units

Sees dividend 162.00 yen, estimate 223.36 yen

Sees FX assumption 150 yen/USD

Sees FX assumption 175 yen/EUR

Analyst commentary was broadly negative, courtesy of Bloomberg:

Citi (Tokiya Baba)

• Guidance includes a ¥100 billion impact from higher component prices centered on memory chips as well as US tariff effects

• The Switch 2 price hike timing is a surprise, and it will raise concerns about near-term sales momentum deceleration

• However, announcing the early price change appears to have partially resolved the Switch 2 profitability deterioration concerns that have weighed on the stock

• The company targets Switch 2 volume of 16.5mn units (-3.36mn units YoY) and software volume of 165mn units (-20.62mn units YoY, excluding Switch 2 bundled software)

SMBC Nikko (Eiji Maeda)

• Investor expectations had likely already declined due to rising memory chip prices, but there is a risk of a further negative stock price reaction to the company's forecasts

• While guidance looks conservative, it's necessary to keep a close eye on the impact of price hikes on sales

Jefferies (Atul Goyal)

• The operating profit forecast looks conservative, as the company's past pattern dictates

• 2nd year for Switch 2 is crucial and our non-consensus view is that the company will release a Mario AAA title this year

Bernstein (Robin Zhu)

• Investors focus chiefly on what the summer showcase season might bring that might help shore up investor confidence. Nintendo's first-party pipeline remains the key.

Morningstar (Kazunori Ito)

• Why would Nintendo issue guidance for declining software sales when they should be ramping up user activity in the console's crucial second year? ... It's baffling.

In Tokyo, Nintendo shares plunged 9%, falling deeper into bear-market territory and down around 34% on the year. Much of the stock's run-up on Switch 2 hype has been erased since memory became an issue in late 2025.

"SoftBank, Toyota and Nintendo weighed on both benchmarks, with Nintendo dropping as much as 10% after the Switch 2 maker's sales forecast disappointed the market," UBS analyst Sarath Kutty wrote in a note.

Our reporting:

• Soaring Memory Costs Sink Nintendo Shares; Goldman Says Selloff Is Buy-The-Dip Opportunity

• Nintendo Profit Misses As Soaring Memory Prices Could Become Major Headache

• "Awful News": Nintendo Shares Get 'Donkey Konged' After Switch 2 Production Cut

It has been very clear to us since late last year that the memory crunch would hit Nintendo.