Nintendo cuts sales forecast for its ageing Switch console after disappointing holiday season

Nintendo on Tuesday cut the outlook for its Nintendo Switch console and games sales and slashed its profit outlook for its current fiscal year.

The Japanese gaming giant said it now expects to sell 18 million Switch units for the fiscal year ending March 2023, down from a previous forecast of 19 million. Nintendo said it now also expects sales of 205 million software units, down from a previous projection of 210 million units.

Nintendo slashed its net profit outlook to 370 billion Japanese yen ($2.8 billion), from 400 billion yen previously.

The company said the reason for the cut in hardware sales expectations is because the Switch "did not perform as expected" during the holiday season.

Electronics makers are facing a tougher macroeconomic environment.

"Nintendo could not completely prevent falling victim to the current economic environment and is likely disappointed itself with the quarter," Serkan Toto, CEO of Tokyo-based games consultancy Kantan Games, told CNBC.

Another issue Nintendo contends with is that its Switch console is nearly six years old. Sony's rival PlayStation 5 is just over two years old. Nintendo released a version of the Switch with an upgraded display in October 2021. Now, investors are wondering when the company might release new hardware to revive sales.

"There is definitely new hardware in the works, the big question marks are when it will be released and weather it will be an upgraded Switch, an even more beefed up 'Switch 2' or a completely new platform," Toto said.

Nintendo sold around 8.23 million Switch consoles in the December holiday quarter, down around 22% year-on-year.

While Nintendo is struggling, its rival Sony this month raised its PS5 sales target by one million units to 19 million for the year to March.

There were some bright spots in the Nintendo earnings report. Digital sales of Nintendo games rose by 10.2% year on-year to 122.1 billion yen in the December quarter, showing record quarterly sales for this period, the company said.

Nintendo added that its new Pokemon Scarlet and Pokemon Violet games, which were released on Nov. 18, sold 18.2 million units in the seven weeks after release, marking the "fastest start of any title for a Nintendo dedicated video game platform."

The Japanese gaming giant is also gearing up for the May release of Legend of Zelda: Tears of the Kingdom, one of its most popular franchises, which analysts said could help the company.

"Not only the next Zelda, but also the next Switch upgrade cannot come soon enough," Toto said.