Nintendo Q1 FY2022 earnings brief: Software, hardware, and sales dip

Nintendo kicks off its new FY2022 year with earnings slides across the board, with hardware, software, revenue, operating income and total profits all down nearly double percentage points.

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Nintendo's Q1'22 missed analyst expectations but still held traction from last year's record highs. Nintendo earnings are slightly moderating as markets adjust to post-pandemic spending, but Q1 earnings remain stable despite FY21's huge gains. All the main metrics are down, likely due to constricted semiconductor stock which has made Nintendo Switch hardware difficult to find.

Hardware sales are tremendously important for Nintendo: Not only does it sell every Switch console at a profit, but the system is a gateway to software sales, which are the main drivers for the company's business.

• Net Revenue - 322.467 billion yen ($2.947 billion), down 9.9%
• Operating Income - 119.752 billion yen ($1.094 billion), down 17.3%
• Net Income - 92.747 billion yen ($847.314 million), down 12.9%

Nintendo also saw a 13.4 billion yen boost on positive foreign exchange rates.

Gaming made up 308.9 billion yen or 2.822 billion, which was 95% of total net revenues.

• Software - 45.28 million units (-5.15 million, -10.21%)

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Software made up the bulk of game segment earnings, or 72.3% of the total. This represents 223.358 billion yen ($1.946 billion).

Total software sales volume was down 10.2% year-over-year.

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46.9% of these game sales were digital, or about 21.23 million copies. That's a -8.7% difference from the record Q1 FY21 period when Animal Crossing took the world by storm, but the drop is offset by favorable sales in key games like New Pokemon Snap (2.07 million), Miitopia (1.04 million), and Mario Golf Super Rush (2.04 million).

The Nintendo Switch has sold over 632 million games to date.

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Nintendo's top 10 games also saw a nice increase with both Mario Kart 8 and Animal Crossing selling over 1 million copies in the quarter.

• Hardware - 4.42 million Switch consoles (-1.26 million, -22.8%)

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Hardware represented 47.6% of total dedicated games earnings, or 147 billion yen ($1.31 billion).

Nintendo has sold-in 89.04 million Switch consoles to date, of which 85 million have sold-through. That means Nintendo has sold 95% of the Switch units it has shipped worldwide.

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Nintendo has set its FY22 forecast lower than FY21 as a conservative measure as it expects pandemic-level spending to somewhat moderate.

Nintendo expects to earn 1.6 trillion yen from net sales and ship 25.05 million Switch consoles in FY22, down 3.79 million Switch systems from last year. The new $349 Switch OLED model is included in these figures.

Even still, Nintendo expects the Switch to outsell the Wii by 2022, and the console should also outsell the Game Boy throughout 2022.

At the time of writing on August 5, Nintendo shares have dropped 8.27% to 51,820 yen per share.