Nintendo has created a 'negative margin situation' with Switch 2 sales in Japan, analyst says

The region-locked Switch 2 might have created a growing unprofitability situation for Nintendo, as one analyst believes Nintendo is losing money each time it produces a Japan-only console.

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Nintendo has asserted that the Switch 2 is generally produced and sold at a profit, but that may not be true for all of its console variants. Toyo Securities analyst Hideki Yasuda estimates that the Japanese-exclusive, region-locked Switch 2 is currently unprofitable for Nintendo, and as the company sells more of these systems, the divide between profits and losses will expand. The company introduced the model in a bid to improve its domestic market share, and the losses are incurred strategically to help promote a cheaper, more affordable product.

"As a result, the Japanese market is experiencing a growing negative margin situation, where the manufacturing costs of hardware exceed the selling price, and the more the console sells, the worse its profitability becomes," Yasuda wrote in an analysis piece for Diamond Online.

"Increasing the actual unit price of the Switch 2 and improving profitability are essential," Yasuda goes on to say, highlighting that Nintendo could introduce various optional models as well as color variants to help drive up prices and establish better profits on the specialty devices.

"To improve the situation where the more consoles sell, the more losses there are, it is essential to adjust the hardware price."

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Nintendo's profits are indeed being impacted as the Switch 2 continues growing. The latest holiday 2025 results show decent demand for the Switch 2, with the console shipping over 7 million units during the period. Nintendo saw $5.1 billion in net sales during Christmas-time, however this was the 5th best-earning holiday net sales in the Switch/Switch 2 lifecycle.

Profits were lower, with Nintendo pulling in $991 million in operating profit, representing a 19% profit margin.

Nintendo has yet to announce price hikes for the Switch 2, and consumers interested in the console may want to buy one now, especially those that live in Japan.