Nintendo Q3 2024 $7974 (-2,81%)

Financial performance

In the first half of fiscal year 2025, Nintendo recorded a drastic decline in net sales of 34.3% to 523.2 billion yen. Operating profit fell by 56.6% to 121.5 billion yen, while ordinary profit fell by 61.3% to 147.1 billion yen. Net profit fell by 59.9% to 108.6 billion yen.

Balance sheet overview

Total assets decreased by 80.0 billion yen and amounted to 3,071.3 billion yen as at September 30, 2024. Total liabilities decreased by 14.3 billion yen to 532.0 billion yen, while equity decreased by 65.6 billion yen to 2,539.3 billion yen.

Income overview

• Cost of goods sold: 205.4 billion yen
• Gross profit: 317.9 billion yen
• Administrative and selling expenses: These increased by 2.2% to 196.4 billion yen.

Key figures and profitability ratios

The operating profit margin fell by 12.0 percentage points to 23.2%. The net profit margin also fell by 13.3 percentage points to 20.8%.

Segment information

• Sales from specialized video game platforms fell by 34.1% to 485.2 billion yen.
• Revenues from mobile and IP-related businesses decreased by 43.3% to 31.2 billion yen.

Competitive position

The Nintendo Switch platform is facing challenges as it is in its eighth year of life, resulting in significant declines in hardware and software sales.

Forecasts and comments from management

Forecasts have been revised downwards: Net sales forecast is now 1,280.0 billion yen and operating income is now 360.0 billion yen for fiscal year 2025. Sales expectations for Nintendo Switch hardware have been lowered to 12.5 million units and for software to 160.0 million units.

Risks and opportunities

Risks: The continuing depreciation of the yen is having a negative impact on spending in foreign currencies.

Opportunities: New software releases and the potential for increased user loyalty for existing titles.

Summary

Nintendo faced significant challenges in the first half of FY2025, reflected in a significant decline in sales and profitability metrics. The company has adjusted its forecasts downwards, reflecting the ongoing difficulties in the market and the maturity of the Nintendo Switch platform. Despite these challenges, Nintendo remains committed to leveraging new software releases and maintaining consumer loyalty to stabilize and potentially expand its market position.

Positive aspects

• Gross profit margin improvement: Despite a decline in gross profit, the gross profit margin increased by 1.5 percentage points to 60.8%. This is due to a higher proportion of digital sales and a decrease in the proportion of less profitable hardware sales.
• Increase in interest income: Interest income increased significantly to 30.8 billion yen, which helped to cushion some of the negative impact of foreign exchange losses.
• Stable sales of evergreen titles: Games such as Mario Kart 8 Deluxe continue to perform well and contribute to stable sales figures for older titles.
• Share of digital sales: The share of digital sales increased by 6.1 percentage points to 56.3%, indicating a trend towards more profitable digital distribution channels.
• Investment in research and development: Spending on research and development increased by 15.5%, underlining the company's commitment to innovation and the development of future products.

Negative aspects

• Significant decline in net sales: Net sales decreased by 34.3% year-on-year to 523.2 billion yen, indicating a significant decline in revenue.
• Decline in operating income: Operating income fell 56.6% to 121.5 billion yen, due to decreased sales and rising selling, general and administrative (SG&A) expenses.
• Foreign exchange losses: The company recorded foreign exchange losses of 22.4 billion yen, which had a significant negative impact on ordinary profit.
• Decline in hardware and software sales: Nintendo Switch hardware sales decreased by 31.0%, while software sales decreased by 27.6%, highlighting the challenges in maintaining sales momentum.
• Decline in net profit: Net profit decreased 59.9% to 108.6 billion yen, highlighting the overall decline in profitability.