Can Nintendo Snap 'Hit-and-Miss' Console Track Record With Switch 2?

Nintendo NTDOY (T:7974), one of Japan’s best-known and oldest brands, is looking to shake a reputation for following up a hit gaming console with a dud, as it releases the Switch 2.

It is also contending with rising supply costs for materials to make the systems, rising tariffs at customs, and rising production costs at video-game studios, which have experienced a string of layoffs in the last couple of years. That has led Nintendo to release games for the new system at a hitherto unseen price – always an unpopular move.

The Switch 2 goes on sale Thursday. The new console is the follow-up to the massively successful Switch, one of the highest-selling video-game systems in history.

Shares Up Almost One-Third This Year

Anticipation has driven Nintendo shares up 30.7% to date this year. By contrast, the broad-market Topix is flat in Tokyo so far in 2025, and the exporter-heavy Nikkei 225 is down 4.5%, hurt by trade disruption. The Switch 2 was formally announced in January, but had been leaked and rumored for the better part of two years.

The Switch 2 upgrades the memory and processing power of its predecessor, as well as offering a larger screen and improved controls. But it is unusual for Nintendo to release a “sequel” console, with its past platforms often quite different from one another, attempting innovations not seen in gaming before.

The Switch fit that model when unveiled in 2017, offering a handheld portable system that could be played on the go and also docked to play on a conventional TV or gaming screen. It combined the best of both worlds in terms of convenience, at the expense of the more powerful performance of competing gaming systems, chiefly the PlayStation from Sony SONY (T:6758) and the Xbox from Microsoft MSFT, which sit as part of your entertainment system.

From Flowers to Flops

The Switch, buoyed by a boom in home gaming during the Covid-19 pandemic, has since sold 152.1 million units in the eight years since its introduction. That ranks it third in the pantheon of game systems, behind only the 154.0 million copies of the Nintendo DS, and the top-selling PlayStation 2, with 160 million units sold.

It turned around the fortunes of Nintendo, which saw poor sales on its previous console, the Wii U. The company began life in Kyoto in 1889 making Japanese playing cards known as hanafuda, or “flower cards,” and launched into video games in the 1970s. It had an early smash hit with Donkey Kong in 1981, at first on stand-alone coin-operated machines, then with its first system for home gaming, the Family Computer or Famicom, released in 1983.

That system was upgraded into the Nintendo Entertainment System for U.S. and worldwide sales. Nintendo has pioneered a series of innovations, with the hand-held Game Boy a roaring success. The company has also helped shape, literally, the controls used to operate gaming systems.

But Nintendo has not hit the mark in following up on hit consoles. For instance, the Wii U is its worst-selling system so far, a successor to the Wii, which sold very well and introduced the world to motion controls. The GameCube flopped as a follow-up to the highly rated Nintendo 64. The dual-screen Nintendo DS sold far better than its successor, the 3DS, which appeared to mark Nintendo’s exit from handheld gaming – until the company unveiled the Switch, a new portable that upended what gamers thought they wanted from a console once more.

Consoles No Loss Leader

So a lot is riding on the success of the Switch 2. Nintendo is not typically willing to take a loss on consoles in a bid to sell more games, unlike Sony and Microsoft. What’s more, the Switch has sold 1.39 billion games, making it Nintendo’s top seller in terms of software sales.

The new console raises the bar on costs. It retails for $450, or $500 for a bundle that includes a new edition of the top-selling Mario Kart racing game. That’s well ahead of the original $300 price for the Switch. Nintendo is also raising the price of a game to $80 if you buy the new Mario Kart World on its own, with the same price slapped on Switch 2 updates of other games. That’s $10 higher than the highest-price game on the Switch.

The Switch 2 does add some features such as voice chat, to allow for a more social gaming experience. The hand-held motion controls connect magnetically to the console instead of via grooves, and can operate as a mouse. The screen can support 4K resolution, with the improved larger display able to run up to 120 frames per second. The Switch 2 also has eight times the amount of internal storage.

Strong Early Signs for Sales

But it’s an iteration on the Switch rather than a revolution. Still, demand has been high enough and pre-orders strong enough that the company, still based in Kyoto, set up a system aimed at preventing scalping. Anyone attempting to order a Switch 2 in advance had to have a Nintendo account for more than a year, and to have logged at least 50 hours of play on their existing Switch.

Sony’s PlayStation 5 and Microsoft’s Xbox Series X both debuted in 2020 during a chip shortage caused by the pandemic. That led to supply shortages and rampant scalping of the systems, with supply taking two years to revert to normal. Even the original Switch was frequently bought to resell.

The Switch 2 goes on sale with no new console declared from its competitors. With Xbox sales lagging PlayStation, Microsoft is adapting its strategy to focus on gaming subscriptions and to offer its games on multiple platforms, including personal computers and rival consoles. Although cloud gaming hasn’t broken the tether to physical consoles, the quality and range of games on a platform will ultimately drive sales.

Early signs of interest for the Switch 2 are strong. Nintendo has forecast sales of 15 million consoles for the Switch 2 in its first fiscal year, running through March 2026, the same levels as the original Switch. But some analysts believe that estimate, at 10% of total sales for the Switch, is conservative.

Fittingly, there will be a new Donkey Kong game for the Switch 2, harking back to Nintendo’s video-game roots. That goes on sale in July.

Nintendo stock predicts a strong future for the Switch 2. The shares have advanced almost five-fold since the debut of the Switch. They’ve been very steady performers despite disruptions to the global economy. Strong sales of the new console will suggest that kind of performance should continue. 

At the time of publication, Alex Frew McMillan had no position in any security mentioned.