(Bloomberg) -- Nintendo Co. shares fell 7.1% on Wednesday after the company cut its fiscal-year forecast for Switch console sales by 10% to 19 million. It was the biggest drop in over a year for the Kyoto-based games maker, which also maintained its operating profit outlook despite strong currency tailwinds.

Operating profit for the quarter ended September was 118.7 billion yen ($809 million), up from 100.2 billion yen in the same period a year earlier. Nintendo revised up its net income forecast for the year, pointing to the weaker yen as a key reason, but kept its full-year operating profit expectation at 500 billion yen.

Nintendo said it sold fewer Switch consoles in the quarter than the year-ago period in part because of a prolonged chips shortage. The company says it’s now front-loading production to maximize delivery in the holiday shopping season and production output has been improving since September. President Shuntaro Furukawa said in a briefing after the results that demand for the console remains firm.

What Bloomberg Intelligence Says

Nintendo needs to drive software sales and live services to support long-term earnings growth as the Switch platform enters the mature phase of its cycle. Hardware sales could continue to decline as momentum from Animal Crossing fades further, barring a reported -- but as yet unconfirmed -- new Pro console.

-- Nathan Naidu, BI analyst

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Splatoon 3, the latest installment of a core Nintendo franchise, became the company’s fastest Switch software launch ever, with 3.45 million units sold domestically over its first three days. Its September launch gave a lift to the hit-driven sales of Nintendo’s five-year-old Switch console and that momentum is expected to be sustained by the Nov. 18 launch of the latest entries in the Pokemon series.

The company raised its net income forecast by 18% to 400 billion yen for the fiscal year. It kept its software sales outlook unchanged.

Nintendo got a big boost from this year’s precipitous drop in the yen’s value. The currency trades at its lowest level against the US dollar in more than 30 years, and Nintendo gets four fifths of its sales from outside Japan while its software production costs are denominated mostly in the domestic currency.

Read more: Nintendo Surges After Record Debut of New Switch Game

Analysts are closely tracking the Switch console’s momentum heading into the year-end holiday season as supply chain constraints wane. Nintendo has consistently said demand for the handheld-hybrid console remains strong, despite the gadget’s age.

“It is strange that Nintendo cut its forecast of Switch shipments by 10% even though there is a broad consensus the chip shortage is easing,” said Tokyo-based industry analyst Serkan Toto. “I expect the next quarter to be another home run for Nintendo, largely thanks to the release of the new Pokemon title next week.”

--With assistance from Yuki Furukawa.

(Updates with shares and chart)

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