Nintendo made $902 million in profit last quarter (April–June 2026), up 150.5% from the same period a year earlier (The Verge). About $300 million of that came from tariff refunds — money the US government returned to Nintendo after tariffs (a kind of import tax) previously paid on gaming hardware were rolled back. Overall sales for the quarter actually fell 9.5% from a year ago, to 517.8 billion yen (Nintendo IR).

The tariff refund is causing legal trouble. Nintendo says it paid the tariff costs itself rather than raising prices on customers, and argues that buyers who paid higher Switch prices are not owed a share of the refund. A lawsuit claims the opposite — that Nintendo passed the costs to consumers and then kept the refund money. Nintendo has asked the court to dismiss the case. A similar lawsuit was filed against Sony in May, accusing it of a "double recovery windfall" — collecting refunds after already raising PlayStation prices (The Verge).

Switch 2 console sales dropped from 5.82 million units a year ago to 3.82 million units. But that 3.82 million is up from 2.49 million in the previous quarter, so sales are improving month to month. Software (games) told a different story: Switch 2 game sales rose 9.2% from a year earlier, while games for the original Switch were up 38.6% (The Verge).

Nintendo kept its full-year forecast unchanged at 2,050.0 billion yen in sales and 370.0 billion yen in profit (Nintendo IR). The company also plans to revise the price of the Switch 2 sometime before March 2027 (Nintendo IR). Its forecast assumes an exchange rate of 150 yen to the US dollar and 175 yen to the Euro (Nintendo IR).

The tariff refund's impact on the profit figure is large. At about $300 million out of $902 million in total profit, it makes up roughly a third of what Nintendo earned this quarter. Without it, profit would have been closer to $600 million — still up from last year's $360 million, but at a much less dramatic rate of growth. The comparison to last year is also flattering because Nintendo's previous fiscal year ended with lower-than-expected profit of 360.1 billion yen (Reuters.

The exchange rate assumption in Nintendo's forecast matters more than it might seem. The company is planning around 150 yen to the dollar for the full year. Actual rates have swung widely — from about 122 yen per dollar in 2022 to 159 in 2026 (Nintendo IR). When the yen is stronger than expected, Nintendo's dollar earnings shrink when converted back to yen. When it's weaker, they grow. With Q1 profit already covering 38.5% of the full-year target, Nintendo is either expecting a big slowdown over the next nine months or building in cushions for currency shifts and seasonal patterns.

The software numbers are the quiet good news in this report. A 38.6% jump in original Switch game sales and 9.2% growth for Switch 2 games means people are still buying titles across both the old and new consoles. Nintendo has always worked like a razor-and-blades business: sell the console at a thinner margin to get it into homes, then make the real money on games over time. The Q1 software figures suggest that model is still working, even as the transition from Switch to Switch 2 moves through its early phase.

The lawsuit adds an unpredictable element. If the court lets the case proceed to the evidence-sharing phase, Nintendo's claim that it absorbed the tariff costs rather than passing them to buyers will be examined in detail. The outcome could affect other electronics companies selling in the US, especially with the parallel case against Sony. Any company that received a tariff refund while also changing consumer prices could face similar legal challenges.

Nintendo's choice to keep its full-year forecast the same, even after a Q1 result that already covers a big chunk of the annual target, puts pressure on the remaining nine months. The planned Switch 2 price change will be worth watching: raising the price would weaken Nintendo's legal argument that it absorbed tariff costs, while lowering it or holding steady would support that claim. The tariff refund may have padded Q1, but the core business, software sales, and the courtroom fight over who really paid those tariffs will shape the rest of the year.