A New Nintendo Era Begins

Switch 2 Direct Packed with Surprises

Nintendo hosted its most awaited Direct of (at least) the last 8 years: the Nintendo Switch 2 Direct. The company shared many highlights, some of which were relatively well-known due to leaks/rumours, and others that were not (in pure Nintendo fashion, there were surprises). We will probably get much more information over the coming weeks/months, but considering what Nintendo weighs in my portfolio, I thought sharing what we know up until today was a good idea.

Let’s start with the most important thing: the launch date. As rumoured, the Switch will launch on June 5th, the company’s Q1 2026 quarter end. I anticipate the system will sell out for a good portion of the year, despite several sources claiming that Nintendo is expecting its most significant launch in history and has made available around 6 to 8 million units from the get-go. The supply discourse is relevant because Nintendo suffered two periods of supply issues with the first Switch:

1. At launch (Nintendo’s fault, bad forecasting)

2. During the pandemic (not Nintendo’s fault, semiconductor supply crunch)

The good news is that the June launch date leaves Nintendo enough time to rebuild inventory for the holiday season.

The second most-awaited detail was the price of the Switch 2, and I must say I was surprised (rumours were not right this time). Nintendo will sell the Switch through two “products”:

1. The standalone Switch 2, which will retail for $459.99

2. A bundle with Mario Kart World (more details on this later), which will retail for $499.99.

I’m pretty sure most people were expecting something closer to $399, still higher than the first Switch ($299), but maybe not as high as $460. This has two implications, although I believe it’s a net positive for Nintendo and its shareholders.

First, the price of Switch 2 is around 54% higher than that of Switch 1, which basically means that at the same number of hardware units sold, Nintendo should generate 54% higher hardware sales (at constant currency). The topic of pricing also requires some context. Switch 1 was launched 8 years ago, so a 54% increase in price is equal to a 5.5% price CAGR throughout the period. It is nothing too crazy considering what inflation has been. I know CPI is a shitty metric, but CPI has risen a cummulative 27% since 2017, so Nintendo’s real price increase is closer to 2-3% per year. This real price increase is not an outright price increase because the Switch 2 comes with several new features (discussed in more detail later).

While pricing might receive some pushback initially, I don’t think it will deter demand too much, so we should prepare to see hardware revenue explode. The peak of the prior cycle is starting to look pretty conservative as a proxy, but we’ll see. I must say, though, that potential tariffs might indeed put some pressure on demand at this price point. At a 20% flat import tariff, the Switch 2 will retail for $550, which is a price point that will likely make some people think twice. The good news is that some sources claim that Nintendo has already shipped around 400k units to the US, which should, in theory, be protected from tariff pressures. The problem is that Nintendo will sell many more. Another good news is that if tariffs are targeted (Mexico, China, Canada, and the EU), Nintendo will most likely be able to bypass these as it can serve US demand with its production in Vietnam (Nintendo diversified its supply chain during Trump’s first term, and rightly so it seems!).

Nintendo also shared several relevant accessories for the Switch 2. The most relevant one was the camera. The camera accessory that will be part of a new feature called GameChat:

Source: Nintendo

Through game chat, Nintendo aims to make its games much more collaborative and give players the feeling that they are playing in the same room (I like how The Verge frames it: “It’s a Discord-like Gamechat feature.”). To activate this feature, players will need to hit the famous “C button” with which many were speculating last week:

Source: Nintendo

The price of this accessory was undisclosed, but I believe it will enjoy a reasonable attach rate. Like with any collaboration features, Nintendo has tied its availability to NSO subscribers. However, GameChat will be free until March 31st, 2026, so many players will be able to try it even if they don’t have an NSO subscription (good upsell strategy). In its effort to build a collaborative system, Nintendo also shared Gameshare. This is a feature that was initially launched with the DS (if I am not mistaken), and it allows players to share eligible games with friends (both if they own the Switch or the Switch 2)

The other piece of hardware that was shared was a new standalone controller, one quite similar to that of the PS5:

Source: Nintendo

Having a standalone controller makes sense considering the better specs of the Switch 2 and the fact that it will cater to more hardcore gamers.

Nintendo also announced that the NSO (Nintendo Switch Online) subscription will carry over to Switch 2, but that Switch 2 owners subscribed to the expansion plan will get an added benefit: GameCube games, as well as a GameCube-like controller that will work on any Switch game.

Before jumping into software, I thought it would be a good idea to share some of the specs of the new hardware (some of these were already known!):

• Bigger screen than Switch 1, but same thickness

• Double the pixels of SW1, so better resolution

• 120 frames-per-second on SW2 (vs 60 fps on SW1)

• Joycons are attached magnetically, and you can use them as a mouse

• Sound is more immersive

• 8x more memory than SW1 (256 GB)

• 4K resolution for compatible games on TV mode (pretty sure this + the controller option has been done to cater to AAA games)

All in all, it does seem like the new hardware satisfied several parts of the investment thesis:

1. Caters to the hardcore gamer through better specs

2. It is a continuation of the previous very successful system (the Switch)

Nintendo does seem to be deploying the Apple-like model: iteration on an already rich ecosystem.

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“The Software sells the hardware.”

I’ve discussed Nintendo several times before and often discussed the notion that “software sells hardware.” This belief is Nintendo’s best-kept secret: while its competitors fought to have the best hardware, Nintendo focused on its software to drive hardware sales. Nintendo was proven right in following this strategy, and it will likely follow the same plan this time around. If you want to play Nintendo’s IP, you need a Switch, and most of Nintendo’s IP is not “spec-dependent.”. This means that the software line-up is essential for understanding how the Switch will sell. Before jumping right into it, I want to discuss the three types of games available on the Switch 2.

1. Switch 2 games (duh): both 1P and 3P

2. Compatible Switch 1 games (we already knew this), both 1P and 3P

3. “Revamped” Switch 1 games

It’s this third point that’s interesting. Nintendo has revamped several Switch 1 games to make them more “playable” on the Switch 2. The revamp comes with better graphics, a more fluid gameplay, and other features. Players who owned the game on Switch 1 will be able to pay less than the full game costs to upgrade to the Switch 2 version. Nintendo shared that Mario Party Jamboree, both Zelda games, Kirby, Metroid Prime, and Pokemon ZA legends will all come with a version for the Switch 2. Imho, this is a very intelligent way of leveraging existing software to drive additional sales:

Source: Nintendo

The fact that software sells hardware puts a lot of importance on the gaming ecosystem at launch and Nintendo’s offering of 1P games. Let’s start with the latter. Nintendo announced three 1P games in the Direct. The first one is what everyone thought would be Mario Kart 9: Mario Kart World. This game will launch exclusively on Switch 2, and being one of Nintendo’s most popular titles, it will most likely help fuel replacement demand. It comes with several particularities…

• You can drive anywhere, even outside the course (sort of a discovery mode)

• The most drivers in the series history: 24

• You can drive across the different worlds

I believe it’s the most collaborative Mario Kart I remember, which makes sense considering the strategy surrounding the Camera and the C button. Nintendo will share more details about the game on April 17th.

The company also announced Kirby Air Riders (GameCube remake) and Donkey Kong: Bonanza as part of its 1P lineup. Note that pricing is also interesting: Nintendo is raising prices across its software. The digital version of Mario Kart World will retail for $80, compared to $60 for Mario Kart 8 Deluxe. That’s a 33% increase, probably warranted just due to underlying inflation.

The other interesting news is that Nintendo will discriminate between physical and digital versions. This makes quite a bit of sense considering that Nintendo makes much more money on the digital sale than on the physical sale and therefore wants to (a) incentivize it, or (b) make the same margin if players don’t switch from physical to digital. The physical version of Donkey Kong Bonanza will retail for $79, compared to the digital version of $69. So yes, software prices have also gone up, and Nintendo is trying to “force” a shift to digital. I honestly never thought about how much pricing power Nintendo had been saving just because it took 8 years to release new hardware. Inflation was compounding this entire time, but it was not being reflected in Nintendo’s pricing…until today.

Two other interesting 1P-like games are worth sharing. One is Hyrule Warriors, a game related to the Zelda franchise (everything that happens before ‘Breath of the Wild’). I don’t include it directly in 1P software because it’s developed by a 3P in collaboration with Nintendo. This game will not be available at launch but in winter, which seems like an intelligent way of stimulating holiday demand.

Lastly, Nintendo also announced a “special” 1P game: a welcome tour. Players will be able to play a series of minigames to discover everything about the Switch 2:

Source: Nintendo

One of the advantages of releasing a proven hardware is that the lineup of 3P games is outstanding from the get-go because Nintendo does not need to convince developers. Nintendo made a lot of 3P announcements, some of which you can see below:

• Elden Ring

• Hades II

• Street Fighter 6

• Daemon X Machina

• Split Fiction

• EA Sports: Madden and FC

• Hogwarts Legacy

• Tony Hawk

• Hitman: World of Assassination

• James Bond

• Deltarune

• Borderlands 4

• Civilization 7 (a good use case for the mouse feature)

• WWE 2k

• NBA 2K

• Duskblood

With this, we get to the end of the article. Before ending, I wanted to tell you that I am working on two things related to Nintendo:

1. An article going through the valuation (will be reserved for paid subscribers)

2. A podcast with Ryan O’Connor talking about the new updates

Feel free to subscribe using the link below:

Have a great day,

Leandro