In a major update on the Japanese gaming industry’s financial health released Friday, gaming giant Nintendo has announced it will raise prices for its newly launched Switch 2 console, as skyrocketing memory chip costs driven by the global AI boom create unprecedented margin pressure. The company also warned that its full-year net profit will drop sharply by 27% in the current fiscal year ending March 2026. Rival Sony, by contrast, has delivered a far more optimistic forecast, projecting a 13% rise in gaming division income even as sales of its mature PlayStation 5 console continue to decline.
Nintendo’s price adjustments will roll out in phases across key global markets. Starting May 25, Japanese consumers will see a 20% jump in Switch 2 retail prices. From September 1, the console will cost $499.99 in the United States, an 11% increase, and 499.99 euros in the European Union, representing a 6% price hike.
For the 12-month period ending next March, Nintendo projects net profit will fall to 310 billion Japanese yen, equal to roughly $1.98 billion, on total annual sales of 2.05 trillion yen. That marks an 11.4% drop in revenue from the prior fiscal year. Operating profit is forecast to hit 370 billion yen, a figure that falls well below the average analyst consensus estimate of 480 billion yen, according to data compiled by Bloomberg News.
The prior fiscal year delivered strong results for Nintendo, however. The company reported that net profit surged 52% year-over-year to 424 billion yen, while annual revenue climbed to 2.31 trillion yen, nearly double the prior year’s total. The Switch 2, launched last June, got off to a strong commercial start, with global sales growing steadily after its release. By the end of March, Nintendo had sold 19.86 million units of the new console, boosted by popular first-party titles including *Pokemon Pokopia*, *Mario Kart World*, and *Donkey Kong Bananza*.
The core headwind facing console manufacturers right now is the rapid rise in memory chip prices. The global AI boom has spurred massive demand for high-capacity memory chips from data centers and AI developers, pushing up costs for consumer electronics makers including game console and smartphone producers. Supply chain disruptions linked to ongoing conflict in Iran have further tightened available supplies, worsening the cost pressure for manufacturers.
For Sony, the past fiscal year saw PlayStation 5 sales fall to 16 million units, down from 18.5 million units in the prior 12-month period. Since the PS5 launched in 2020, Sony has sold 92 million units of the console overall, putting the company in a strong position to capitalize on the upcoming November launch of the highly anticipated blockbuster title *Grand Theft Auto VI*. Industry analysts note the franchise is expected to drive a massive wave of new console sales in the coming year.
“If there is any game that can move millions of additional PlayStation units, it is this one,” Serkan Toto, a leading gaming industry consultant, told AFP.
Sony projects that even with lower console sales, its gaming division will see higher profits in the fiscal year ending March 2027. Industry analysts explain that Sony’s more mature position in the PS5 product cycle leaves it better insulated from rising memory chip costs than Nintendo’s newly launched Switch 2.
“Sony’s more mature PS5 console cycle leaves it better placed to weather higher memory costs,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors. “Having already moved past the heavy hardware penetration costs typical of earlier product cycle years, Sony’s bottom line stands to benefit significantly from the high-margin software sales and ecosystem engagement that the *Grand Theft Auto VI* launch should trigger.”
Nintendo, however, faces a more challenging operating environment, Toto noted. Switch 2 consumers are especially price sensitive, he said, and the console’s first-year game lineup is far weaker than that of the original Switch at launch. Even so, Toto added that Nintendo has room to improve its performance by ramping up software releases in the coming months: “But now it’s time for them to really step on the gas on the software side.”