@rallydefault I think the difference is actually more like 100 bucks, for Japan. I'd be interested in the split between the two models available there, but I'm nor sure Nintendo has released that data. I'm also wondering if there are region locked games. I don't like that idea. I've got used to importing at will, really.
@WhiteUmbrella Typically Nintendo always make profit on their hardware from day one and you can see many things costed down on the Switch 2 like the very poor panel however I have to say when Nvidia is involved you wonder how good a price they are getting. Microsoft used Nvidia for their first console the original Xbox but then never again, Sony used them for the PS3 but then never again. Nvidia are not known for being fair with their pricing. Nintendo could be caught paying too much for the hardware despite the T239 chipset being designed back in 2020/2021 with the aborted Switch Pro model. Now its the Switch 2 with likely more memory and storage but you wonder how much Nintendo are paying Nvidia and is it a fair price. However with all that said I still strongly suspect the Japanese pricing is still profitable for them although its always difficult to gauge profit when there are huge R&D costs to pay for any new model. If you factor those costs over the first 3 years of sales of the console it could be unprofitable but if you factor those costs over maybe 5 years it could be profitable etc.
If you look at Nintendo's financial report for April-June 2025, you'll see that Nintendo's revenue more than doubled compared to the April-June 2024 (obviously due to the record-breaking Switch 2 launch), but profits only increased by ~5% YoY. This had resulted in the worst profit-to-revenue ratio for Nintendo in a very very long time, completely different from 2017 when the launch of the Switch 1 more than doubled Nintendo's revenue and profits compared to 2016.
Given this, we can surmise that Nintendo is very likely losing money selling Switch 2 in Japan due to the subsidized region-locked model and are almost certainly losing money selling Switch 2 in the US due to tariffs.
The idea that Nintendo must be selling the Switch 2 at a profit everywhere because that is what happened for prior Nintendo platforms isn't true anymore.
I wonder if this is Nintendo just absorbing all the R&D costs of Switch 2 immediately rather than factoring them in over many years. I don't think we can know the full situation of Switch 2 profitability without full access to all Nintendo's financial dealings which we will never know. If they have absorbed those costs immediately then the following years should show a huge spike in profits I would of thought. The R&D costs would be in the 2024-2025 financial year mainly although the T239 chipset was designed for Nintendo back in 2020/2021 and is based on fabrication technology of that time, Samsung's 8Nm fabrication which is mainly 10Nm and other Nvidia graphics cards launched around that time used like the RTX 3050 and the later RTX 2050 (budget version). However the full product and tooling up to manufacture it would be costs in the 2024-2025 year.
Nintendo provides most of the information you are discussing.
It mentioned R&D and advertising as reasons their operating profit is so low. Note that their R&D is higher but not massively higher than last year, but their advertising costs are through the roof.
Nintendo separately lists gross profits, which take into account direct costs such as hardware, tariffs, the cut the store takes, etc. This came out to 185 billion yen, higher than the previous year for that quarter. This profit was 78% from hardware sales. They do mention their gross profit ratio is only 32% (down from 62 last year) and mention the reason:
"The gross profit margin declined by 29.5 points to 32.3%, reflecting the fact that
proportion of hardware sales became higher with the launch of Nintendo Switch 2.
Nintendo Switch 2, which has a lower profit margin than Nintendo Switch,
accounted for a higher proportion of those hardware sales."
The actual gross profit was 78% from (mostly) Switch 2 and accessories, so at least most of their hardware is making money, if a lot less per unit than in the past. In the US, most of the sales for that quarter was presumably from pre-tariff shipments so we'll have to wait until next quarter to see what that effect is.
Unfortunately they don't give gross profits by region so we can't see if Japan units are losing money, although by comparing multiple quarters in the future we might be able to.
@FishyS
That 78.8% figure is the proportion of overall net sales (i.e. revenue, not profit) that comes from hardware sales. We actually dont know the exactly how Nintendo's profits break down by segment.
@FishyS
That 78.8% figure is the proportion of overall net sales (i.e. revenue, not profit) that comes from hardware sales. We actually dont know the exactly how Nintendo's profits break down by segment.
They give the percentage of hardware net sales in their gross profits section? That is slightly confusing if so. Regardless, we can still compute the approximate hardware profits easily enough by looking at future financial reports since they report both percentage of software to hardware profits and gross profits as well as regional sales and profits.
Those figures really read like Nintendo is making healthy profits from hardware. Yes less of a margin than software but still a healthy margin by any standard. Typically that margin should improve too over time as it did for Switch and previous consoles.
When you think about the Switch 2.
1. It has a low capacity main battery
2. It has a low cost basic display panel
3. It is on a dated cheap Samsung 8Nm fabrication process (mainly 10Nm) from 2020/2021
4. It only has 256GB of storage
5. It only has 12GB of memory
It definitely feels like a product that has been costed down to a degree.
All data I can see indicates a profitable piece of hardware out of the gates so to speak.
@BonzoBanana
If we lived in a world where the Yen was healthy, there were no broad sweeping tariffs in the US, and Covid didn't mess with the pricing of raw materials, then sure, I could believe that the Switch 2 is profitable.
Unfortunately we dont live in that world and Nintendo's own financial statements state that their profits have only slightly increased YoY despite a huge jump in revenue.
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Topic: Does anyone else feel like this is more "Switch U" than Switch 2?
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