Image: The Nintendo Switch
INTERNATIONAL - Nintendo Co. raised its outlook for profit and Switch sales for a second straight quarter following robust shipments during the holidays, the strongest sign yet that the console is going to be a long-term success.

The Kyoto-based company raised its operating profit outlook to 160 billion yen ($1.5 billion) from 120 billion yen for the current fiscal year through March. The company lifted its Switch hardware sales forecast for the period to 15 million, up from 14 million it set in October.

Solid results during Nintendo’s most important quarter help to confirm investors’ bet that the Switch, still less than a year old, will be able to fuel future profitability, following disappointing shipments of the Wii U console. Nintendo’s shares have doubled to a decade-high on that optimism, reaching a market value of 6.8 trillion yen. With the holiday season over and the first wave of big homegrown titles on the market, attention now turns to whether Nintendo can sustain momentum by broadening the Switch’s installation base beyond core fans.

“During our first year, we’ve been fairly successful in selling the Switch to customers who have an interest in video games,” President Tatsumi Kimishima said at a news conference Wednesday. “From our second year, we have to expand it dramatically to those who don’t play video games that often.”

Revenue is now forecast at 1.02 trillion yen for the period, up from 960 billion yen.

Operating profit in the December quarter came in at 116.5 billion yen, based on figures derived from reported nine-month results. That exceeded the 82 billion yen average of estimates compiled by Bloomberg. Revenue was 483 billion yen in the quarter, compared with the prediction for 452 billion yen.

Nintendo sold 7.2 million Switch consoles during the holiday quarter, bringing its lifetime total to 14.9 million and within striking distance of its goal of 16.7 million units by March. Kimishima is aiming for more than 20 million units next fiscal year, he said at a news conference Wednesday.

“We did our best to boost production for the holiday period, but still saw shortages in Japan,” said Kimishima.

The company sold 25.1 million Switch software titles during the quarter. Super Mario Odyssey, which went on sale in October, topped all games with 9.1 million units sold during the period. Nintendo lifted its full-year Switch software sales estimate to 53 million titles, up from 50 million it set in October. Kimishima said more new titles were on the way.

Revenue from Nintendo’s smartphone games was 11.2 billion yen in the quarter, up from 8.8 billion yen in the previous period. Some of the gain can be attributed to Animal Crossing: Pocket Camp app, which became a top-download in most countries including Japan and the U.S. after its launch in November. The app has been downloaded 22 million times and generated $17 million globally through December, according to researcher Sensor Tower.

The portable 3DS business shrank, as Pokemon’s last titles for the handheld console went on sale. Ultra Moon and Ultra Sun, which went on sale in November, contributed to the 17.4 million 3DS software titles sold during the holiday quarter, down from 27.6 million a year ago. Nintendo also managed to sell 3 million 3DS hardware units during the period, down from 3.7 million units a year ago.

Nintendo shares have surged this month, mostly driven by the announcement of Nintendo Labo, new cardboard accessories that users can pop out and fold into everything from motorbike handles to fishing rods and a miniature piano. Reaction has been overwhelmingly positive from analysts, who say the new products could significantly broaden Switch adoption beyond gamers.

“We assumed Nintendo would come out with some additional, new form of play. In the sense of being that ’something’, the Nintendo Labo represents a move toward the future slightly above what we had assumed,” UBS AG analysts Sumito Takeda and Kenji Fukuyama wrote in a report this month. “The product could highlight again the depth of the concepts embodied in the Switch console.”

- BLOOMBERG