Switch 2 is less profitable than Switch 1, Nintendo confirms

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Nintendo will make less profit on each Switch 2 console sold, the company has officially confirmed.

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With premium features like a 7.9-inch 1080p 120Hz display, a new chip that enables 4K gaming, and even a new fan-cooled dock, it's no surprise that the Switch 2 costs more to produce than the original Switch. It's also no surprise then that the Switch 2 would be less profitable than the original Switch, especially the 2017 launch version and the handheld-only Lite.

While we don't know the Switch 2's exact bill of sale, nor do we know what kind of prices that Nintendo would pay on a bulk multi-million wholesale level, the company has at least told investors that the Switch 2 will be less profitable when it comes to hardware sales. The question arose when Nintendo published its full-year FY26 forecast, which showed a significant discrepancy in expected sales (1.9 trillion yen, or about $13 billion USD) and expected profit (300 billion yen, about $2 billion). Nintendo's president had said that tariffs are expected to impact Nintendo's profits by a reduction of tens of billions of yen.

Here's what Nintendo president Shuntaro Furukawa told investors in a Q&A about Switch 2's profitability and the FY26 earnings estimate:

"For the purpose of our consolidated financial forecast for the fiscal year ending March 2026, U.S. tariff rates effective as of April 10, U.S. Eastern Time, are maintained throughout the fiscal year. However, our assumption is that packaged software will not be subject to tariffs because it falls under products exempted from tariffs as announced on April 11. Based on these assumptions, we have factored in a negative impact of several tens of billions of yen at the profit level into our consolidated financial forecast for the fiscal year ending March 2026.

"The reason we expect the operating profit ratio to decline year-on-year in our consolidated earnings forecast is because the proportion of hardware sales is projected to increase with the launch of Nintendo Switch 2 and we expect the gross profit ratio to decline due to Nintendo Switch 2 hardware having a lower profit margin than Nintendo Switch hardware. The operating profit ratio is expected to decline year-on-year in tandem with the decline in the gross profit ratio.

"Our basic policy is that for any country or region, if tariffs are imposed, we recognize them as a part of the cost and incorporate them into the price.

"However, this year marks our first new dedicated video game system launch in eight years, so given our unique situation, our priority is to maintain the momentum of our platforms, which is extremely important for our dedicated video game platform business, and to rapidly expand the install base of our new hardware. Consequently, if the assumptions on tariffs change, we will consider what kind of price adjustments would be appropriate, taking into account various factors such as the market conditions."