Piousbox

Dark storm clouds have gathered over Nintendo since the start of December, as investor concerns mount over tariffs, rising memory prices, and chatter about soft US holiday sales. The stock in Tokyo remains about one-third below its August peak.

Earnings on Tuesday reconfirmed the gloom after Nintendo reported third-quarter operating income that missed the average Wall Street estimate tracked by Bloomberg.

Switch 2 sold 7.01 million units in the December quarter, beating Bloomberg Consensus estimates, but the operating income of 155.21 billion yen, versus the 180.7 billion expected, raised investor concern.

Trade tariffs, combined with rising component costs, especially the explosion in the price of high-bandwidth memory (HBM), are pressuring thin hardware margins for the electronics company.

Goldman analyst Maho Kamiya warned clients in late Decemeber that concerns about rising memory prices and the absence of top-down tailwinds have sent Nintendo shares spiraling. The stock has yet to recover since the warning...

We have outlined a growing list of electronics companies pressured by soaring memory prices, even prompting industry insiders to tell consumers that front-running purchases of PCs, TVs, and other devices that use HBM should be "done now" because the memory shortage, caused by data center buildouts, will only get worse from here.

Snapshot of the third quarter (courtsey of Bloomberg):

• Operating income 155.21 billion yen, +23% y/y, estimate 180.7 billion yen (Bloomberg Consensus)

• Net income 159.93 billion yen, +24% y/y, estimate 147.5 billion yen

• Net sales 806.32 billion yen, +86% y/y, estimate 815.7 billion yen

"Switch 2 sales figures can be seen as okay, but it would be hard to call them solid," Toyo Securities analyst Hideki Yasuda wrote in a note.

Yasuda said, "Looking ahead, concerns such as rising component prices remain, and how the company will once again control costs will be the key point to watch."

According to research firm TrendForce, HBM shortages are fueling major risks for Nintendo as chipmakers prioritize AI data-center memory, potentially limiting console production.

Hence, our most recent note:

• "Do It Now": Industry Insiders Urge Consumers To Front-Run PC, TV, Smartphone Purchases As 'Memory Crunch' Will Intensify

Nintendo maintained full-year guidance:

• Sees FX assumption 150 yen/USD, saw 140

• Sees FX assumption 170 yen/EUR, saw 160

• Still sees operating income 370.00 billion yen, estimate 419.16 billion yen

• Still sees net income 350.00 billion yen, estimate 412.42 billion yen

• Still sees net sales 2.25 trillion yen, estimate 2.37 trillion yen

• Sees Switch 2 hardware sales 19.00 million units

• Sees Switch 2 software sales 48.00 million units

• Still sees original Switch hardware sales 4.00 million units

• Still sees original Switch software sales 125.00 million units

• Still sees dividend 181.00 yen, estimate 204.14 yen

While it may be a golden time for memory makers as prices skyrocket, it is only a matter of time before consumer electronics see price surges and even the risk of limited production. Welcome to the era of AI data centers: the HBM shortage is expected to persist into 2027.