Nintendo's Q1 Sales Experience 9.5% Decline, Yet Operating Profit Surges 150.5% Due to Increased Software Sales and US Tariff Refunds

Nintendo's first-quarter net sales decreased by 9.5%, but the company saw a significant 150.5% increase in operating profit, driven by higher software sales and $300 million in US tariff refunds. The company clarified that these refunds were primarily covered by the company itself, rather than being passed on to consumers. Recently, Nintendo moved to dismiss a class-action lawsuit that alleged the company did not pass these refunds on to consumers. The company's lawyers stated that Nintendo implemented selective price adjustments and chose to absorb the costs of tariffs on some of its most popular products, including the Switch 2 console. For the three months ending June 30, 2026, the company reported: net sales of ¥517.8 billion ($3.2 billion), a 9.5% decline; operating profit of ¥142.5 billion ($902.7 million), a 150.5% increase; ordinary profit of ¥206.1 billion ($1.3 billion), a 115.1% increase; and net profit of ¥147.4 billion ($925 million), a 53.3% increase. Sales of Nintendo's dedicated video game platforms fell 13.3% to ¥483 billion ($3 billion), mainly due to lower hardware sales. However, digital sales rose 90% to ¥132.7 billion ($840 million), driven by increased sales of downloadable packaged software. Despite a 34.4% decrease in Switch 2 unit sales to 3.82 million, Nintendo noted that many consumers continued to adopt the system, encouraged by new titles and other factors. The company also reported that first-quarter sell-in of the console surpassed that of the original Switch in its second year, reaching 23.68 million total units shipped to date. Original Switch hardware sales were 0.66 million units, a 31.8% decline from the previous year. Switch 2 software sales reached 9.46 million units, a 9.2% year-on-year increase, with recent releases such as Yoshi and the Mysterious Book and Star Fox performing steadily. The original Switch software sales rose 38.6% in Q1 to 33.81 million units, driven by Tomodachi Life: Living the Dream, which sold 7.94 million units since its April launch. Nintendo's IP segment sales reached ¥34.8 billion ($220 million), a 107.4% year-on-year increase, driven by the success of The Super Mario Galaxy Movie, which has surpassed $1 billion at the global box office.