Japanese video game giant Nintendo (NTDOY +2.59%) impressed investors on Tuesday with its results for the first half of the year. Revenue more than doubled year over year to 1.1 trillion yen, which converts to about US $7.2 billion. Operating profit rose 19.5% to 145.1 billion yen, while net profit jumped 83% to 198.9 billion yen. Nintendo stock was up about 4.4% at 11:25 a.m. ET Tuesday, according to data provided by S&P Global Market Intelligence.
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The Switch 2 game console is driving sales higher
Nintendo launched the Switch 2 game console, the successor to the highly successful Switch, in June. The Switch 2 launch, coupled with a higher unit price compared to the Switch, pushed up Nintendo's overall revenue.
Gross margin dropped to 36.2% in the first half of the year, down nearly 25 percentage points. Due to the Switch 2 launch, hardware accounted for more than 70% of total sales, up from roughly 40% in the prior-year period. With hardware carrying a lower gross margin than software, and with the Switch 2 having a lower profit margin compared to the original Switch, overall gross margin took a big hit.
The Switch 2 is proving to be a bigger hit than Nintendo originally expected. The company provided a new outlook for the full fiscal year, which ends in March, alongside its first-half results. Nintendo now expects to sell 19 million Switch 2 units, up from a previous forecast of 15 million units. The company also raised its revenue outlook by 18.4% to 2.25 trillion yen, and it boosted its outlook for profitability metrics as well.
OTC: NTDOY
Key Data Points
Defying tariffs, is Nintendo stock a buy?
Despite an adverse tariff environment for its new Switch 2 console, Nintendo is thriving. The company also raised its outlook for software sales this year, with a big increase for original Switch games that can be played on either console. While tariffs remain fluid and the state of the global economy is a wild card, Nintendo looks like a great video game stock to own.
