Nintendo Says AI Memory Inflation Could Add Nearly $700 Million in Costs

Nintendo Co.

Ltd. (OTC: NTDOY ) reported stronger-than-expected fiscal first-quarter results as U.S. tariff refunds, favorable currency effects and solid game sales helped offset weaker Switch 2 hardware demand.

The company maintained its full-year outlook despite rising memory costs and tariff pressures.

Earnings Beat Expectations Nintendo reported revenue of 517.8 billion yen, above expectations of 444.96 billion yen, while net profit came in at 147.4 billion yen, ahead of the 78.30 billion yen analysts expected, CNBC reported.

In U.S. dollar terms, earnings per share came in at 20 cents, beating the 10-cent analyst estimate, while revenue of $3.249 billion topped the $3.080 billion consensus estimate.

Operating profit rose 150.5% to 142.6 billion yen, beating the 70.3 billion yen average analyst estimate compiled, Nintendo also kept its full-year operating profit forecast at 370 billion yen and maintained its sales targets for Switch 2 hardware and software.

The company benefited from U.S. tariff refunds, recording about $300 million as a reduction in cost of sales.

A weaker yen also added a 39 billion yen positive effect on sales, The company also reaffirmed its fiscal 2026 guidance for GAAP earnings of 43 cents per share and sales of $13.071 billion, according to Pro.

The earnings outlook is below the analyst consensus estimate of 51 cents per share, while the revenue forecast trails the $14.810 billion consensus estimate.

Read Also: Pay Up, Gamers: Nintendo Slaps Price Hikes On Switch 2 Globally Switch 2 Demand Remains Key Nintendo sold 3.82 million Switch 2 units in the quarter, down 34.4% from a year earlier, while original Switch hardware sales fell 31.8% to 0.66 million units.

Software sales helped support results, led by "Tomodachi Life: Living the Dream," which sold 7.94 million units, and "Pokémon Pokopia," which sold 1.27 million units.

Nintendo said regular new game releases remain crucial to expanding the Switch 2 user base.

Toyo Research and Advice senior analyst Hideki Yasuda told Reuters that Nintendo appears likely to beat its own Switch 2 hardware sales forecast by a considerable margin because first-quarter unit sales already exceeded 20% of the annual target.

Costs And Game Pipeline Stay In Focus Nintendo said higher component prices, especially memory, and tariffs could add nearly 100 billion yen (~$680 million) to cost of sales.

The company’s Switch 2 uses memory chips whose prices have risen as AI demand boosts chip costs.

Yasuda told Bloomberg that hardware sales likely benefited from last-minute demand before price increases, but he said software sales need more momentum heading into the year-end shopping season.

Freedom Capital Markets analyst Nick McKay told Bloomberg that some investors may remain concerned about rising component prices, tariffs and the lack of a major upcoming hit from flagship franchises such as "Super Mario" or "The Legend of Zelda." Nintendo also pointed to strength beyond games, saying "The Super Mario Galaxy Movie" has generated more than $1 billion at the global box office since its April 1 release.

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