Nintendo has had a profitable financial year, one that has seen it invest a record amount of cash in its research and development projects. As noted by Niko Partners senior research analyst Daniel Ahmad, Nintendo spent approximately $880 million in R&D during the 12 months ended March 31, 2021, with the bulk of the money going towards increased software and outsourcing costs for the Nintendo Switch.
Nintendo continues to invest heavily in R&D.
— Daniel Ahmad (@ZhugeEX) May 6, 2021
In FY2020/21 it spent approximately $880 million on R&D, more than any prior year.
Although I will note that this represented 5.3% of total revenue, which is a lower percentage than prior years, because of strong rev. growth. pic.twitter.com/RVgVg14uQs
Japan-based analyst and investment adviser David Gibson summarized comments made by the company at an investor Q&A after its latest financial results were made public, with Nintendo confirming that it was also investing in a future successor to the Switch. While the company is constantly researching new technology, R&D spend also went towards online investments in addition to development on the next Nintendo console.
Q: In what areas is the increased R&D being spent?
— David Gibson (@gibbogame) May 6, 2021
A: We are still mid way through Switch cycle, so software plus outsourcing costs are increasing for switch which is the main factor. Also cost per title is increasing and need a certain level of scale.
"In order to create a single piece of hardware, we have to do a lot of preparation several years in advance, so we are working without stopping," Nintendo president Shuntaro Furukawa previously said of the company's approach towards creating a new gaming console. "In the end, the deciding factor in whether or not to commercialize a product is whether it can create a new experience."
Nintendo says that the Switch is currently midway through its lifecycle, with the console having done some of its best numbers in the 2020 financial year. Almost 85 million Switch consoles have been sold as of March 31 this year, Nintendo games continue to sell incredibly well, and operating profit is up by 81.8% year-over-year, the highest figure that Nintendo has ever recorded.