Nintendo Stock Falls Over 10% After Revenue Miss and Memory Chip Worries

Nintendo Co. shares dropped more than 10% on Wednesday after the company reported quarterly revenue below analyst expectations and highlighted challenges tied to a global shortage of dynamic random-access memory (DRAM) chips. The sell-off erased more than 15% of the stock’s value since the start of the year and underscored investor unease about rising component costs and the growth outlook for the Switch 2 console.

On Tuesday, Nintendo posted a 24% year-over-year increase in profit, aided by sustained demand for the Nintendo Switch family, now the firm’s best-selling hardware line since its 2017 debut. Revenue rose 86% from the same period a year earlier but still lagged market forecasts, prompting concerns about margins as component prices climb.

President Shuntaro Furukawa told investors that stronger DRAM pricing had not materially dented earnings in the current fiscal year. He cautioned, however, that prolonged cost inflation could squeeze profitability if the trend persists. The warning comes as spot and contract prices for standard DRAM are projected to rise 90% to 95% in the March quarter versus the preceding three months, according to market researcher TrendForce.

Demand for memory chips has surged as artificial intelligence applications and data-center expansions accelerate. Industry groups expect tight supply conditions to extend for several years, with one top chipmaker recently forecasting shortages through 2027. DRAM is a critical component in Nintendo’s handheld-hybrid consoles, and the escalating cost base has prompted speculation that the company may eventually lift hardware prices.

“If the current trend in the memory space continues, Nintendo might be forced to adjust retail pricing,” said Serkan Toto, chief executive of Tokyo-based consultancy Kantan Games, in comments circulated to investors. The Switch 2, released in June 2025, already sits at the upper end of Nintendo’s historical price range, making additional increases potentially difficult for the brand’s largely casual audience.

Switch 2 Momentum Under Scrutiny

Switch 2 accounted for the majority of Nintendo’s console shipments during the quarter, yet analysts remain cautious about its sales trajectory. The first twelve months after a system launch are traditionally decisive for long-term success, and the original Switch posted exceptional numbers during its inaugural year—raising the bar for its successor.

James McWhirter, senior analyst at research firm Omdia, told clients that 2026 could prove “make-or-break” for the Switch 2 as Nintendo seeks broader mainstream adoption. Maintaining momentum, he said, will require a consistent pipeline of high-profile software that encourages existing owners to upgrade and attracts new players to the ecosystem.

Nintendo’s near-term release calendar includes “Mario Tennis Fever” in February and “Pokémon Pokopia” in March, two titles from franchises historically associated with hardware boosts. The company is also banking on cross-media synergy: “The Super Mario Galaxy Movie,” slated for April, follows the 2023 “Super Mario Bros.” film that gave a noticeable lift to Switch sales in the quarters after its premiere.

Investors Focus on Margin Pressure

The memory shortage’s impact on Nintendo’s margins remains the central question for shareholders. Andrew Jackson, head of Japanese equity strategy at Ortus Advisors, wrote in a note that investors are monitoring how far Nintendo can offset higher component costs through software revenue, digital services, and supply-chain efficiencies.

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Furukawa reiterated the company’s full-year sales forecast for Switch 2 despite the tougher environment, signaling confidence in upcoming releases and ongoing demand. Still, the cost dynamics of DRAM leave little room for error. Memory accounts for a significant portion of the bill of materials for a portable console, and the jump in market prices since late 2024 has been sharper than any period since the mid-2000s.

TrendForce estimates suggest that expanding AI workloads could keep DRAM inventories tight through at least 2026. Major foundries have prioritized high-bandwidth memory favored by data centers, further constraining supplies of conventional DRAM used in consumer electronics. If those priorities hold, Nintendo and other device makers may have limited bargaining power on pricing.

Shares Underperform Broader Market

Wednesday’s slide left Nintendo stock down more than 15% year-to-date, underperforming Japan’s benchmark equity indices and the broader gaming sector. The company’s market capitalization has fallen sharply from the highs reached just before the Switch 2 launch, reflecting uncertainty over margins and the sustainability of hardware demand.

Analysts note that the situation differs from 2017, when Switch debuted into a relatively benign component-cost environment and faced limited competition in the hybrid console space. In contrast, Switch 2 must navigate not only expensive parts but also a crowded market where cloud gaming and subscription services vie for consumer attention.

For now, Nintendo’s strategy hinges on leveraging its proprietary intellectual property to drive hardware attached rates. The performance of flagship games in the coming months—and whether the pending film release sparks another wave of interest—will likely determine if the company can offset memory cost pressures without resorting to price hikes.

Crédito da imagem: Kiyoshi Ota / Bloomberg / Getty Images