(Bloomberg) -- Nintendo Co. raised its forecast for the fiscal year ending March on expectations it can sell more games to existing Switch owners.
The Kyoto-based entertainment company said it now expects operating income of ¥500 billion ($3.3 billion), up from ¥450 billion previously. It based its new guidance on a weaker yen value than previously, though it fell short of average analyst expectations of ¥529 billion. The company also said it expects to sell 5 million more copies of games, raising its forecast to 185 million.
Nintendo reported operating profit of ¥94.5 billion and revenue of ¥334.9 billion in the September quarter, both beating analyst expectations. The yen's weakness helped Nintendo's earnings, the bulk of which comes from overseas.
“Sales of hardware as well as first-party titles including were not that strong outside Japan,” Toyo Securities analyst Hideki Yasuda said. “I expect Nintendo will report similar results for the December quarter, though the company is likely to raise the hardware forecast due to the recent strong sales of special editions.”
Nintendo did not revise its outlook for its signature console, though President Shuntaro Furukawa said the original goal of 15 million units in the year through March would be hard to accomplish. Now more than six years old, the Switch has sustained its popularity with the help of game-themed custom editions and a regular flow of in-house blockbuster titles drawing new users to the platform.
The handheld-hybrid console has sustained sales deep into its lifespan, however upgraded next-generation machines from Microsoft Corp. and especially Sony Group Corp. have raised the competitive stakes. Sony's PlayStation 5 has been the best-selling console in the US this year, according to data from Circana, formerly NPD.
What Bloomberg Intelligence Says
Nintendo's upgraded fiscal 2024 sales and profit metrics are most likely driven by better-than-expected sales from new software based on its key franchises such as Zelda, Pokemon and Mario, supported by a weaker yen that drove 6.6% of FY2023's pretax profit. FY2024 sales and net profit are still expected to fall 1.4% and 3%, vs. 9.5% and 21.4% earlier.
— Nathan Naidu, BI analyst
The successful launch of in April may provide a tailwind for Nintendo's software library and hardware sales, as the company also launched a new game in the Mario franchise recently. This month, Nintendo added to its initiatives to expand its audience by doing video game events at nursing homes in Japan.
The surge in artificial intelligence technology is likely to greatly benefit game platforms including Microsoft's Xbox and Sony's PlayStation, who'll be “the most clear-cut beneficiaries” in the games industry, Morgan Stanley analysts led by Matthew Cost wrote last month. Nintendo has less upside from AI adoption, but also faces low risk of disruption, they added.
(Updates with additional details from earnings report)
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