Nintendo’s fiscal first quarter beat analyst expectations by a wide margin, even as sales of its flagship Switch 2 hardware fell sharply from a year earlier, CNBC reported.

Revenue for the quarter ended June 30 reached 517.8 billion yen, or $3.28 billion, compared with LSEG median estimates of 444.96 billion yen.

Net profit was 147.4 billion yen, well above the 78.30 billion yen analysts expected.

The company kept its annual forecast unchanged for the year ending March 2027, maintaining its net sales outlook at 2.05 trillion yen.

Nintendo shares closed 2.87% higher ahead of the earnings release.

Hardware Weakens As Costs Rise

Switch 2 hardware sales fell 34.4% year on year to 3.82 million units, while sales of the original Nintendo Switch dropped 31.8% to 0.66 million units.

Nintendo said consumers continued to adopt the Switch 2 despite lower hardware sales than in the year-earlier period, supported by new titles and other factors.

The company has also built nearly 100 billion yen of pressure from higher component prices and tariffs into its cost of sales.

Memory is a particular cost issue because the Switch 2, launched last June, uses chips whose prices have risen sharply amid strong AI demand.

Nintendo has already moved on pricing.

In Japan, where it raised Switch 2 prices on May 25, hardware sell-through remained solid, the company said.

In the United States, the console’s retail price is set to rise by $50 to $499.99 from $449.99 effective Sept. 1.

Software And Film Revenue Support The Quarter

Game sales were led by Tomodachi Life: Living the Dream, which sold 7.94 million units, and Pokemon Pokopia, which sold 1.27 million units.

Nintendo said releasing new titles at regular intervals is crucial to expanding the Switch 2 installed base, with a steady pipeline helping broaden the console’s appeal to more consumers.

Outside games, The Super Mario Galaxy Movie has generated more than $1 billion in global box office revenue since its worldwide release on April 1, making it the second highest-grossing film ever based on a video game.