First, The Conclusion
If you view Nintendo stock only through "Switch 2 hardware unit sales," you see only part of the company.
For the fiscal year ended March 2026, Nintendo expanded to revenue of 2.313 trillion yen and operating profit of 360.1 billion yen as Switch 2 launched. At the same time, profit from investments accounted for using the equity method swelled to 82.7 billion yen. That was a large increase from 35.1 billion yen in the previous fiscal year.
It is not possible to assert that all of this equity-method profit came from The Pokemon Company. Nintendo has other equity-method affiliates, and consolidation adjustments are also involved.
Even so, the fact that The Pokemon Company's net income exceeded 120 billion yen is weighty.
If we simply multiply The Pokemon Company's net income of 120.056 billion yen by Nintendo's 32% voting ownership ratio, Nintendo's economic share is roughly 38.4 billion yen. This will not match accounting equity-method profit exactly, but it is enough to understand the scale.
The issue is that this does not appear in Nintendo's operating profit.
The market tends to treat Nintendo as a hardware-cycle stock. Behind that, however, is a huge IP stake that generates cash on a different cycle from hardware sales. How investors value that stake changes the way Nintendo looks quite a lot.
How Strong Are The Pokemon Company's Results?
First, here are the numbers.
The main figures confirmed in The Pokemon Company's 28th fiscal-year public notice for the fiscal year ended February 2026 are as follows.
| Item | FY ended Feb. 2026 | YoY |
|---|---|---|
| Revenue | 531.428 billion yen | +29.3% |
| Operating profit | 143.972 billion yen | +43.0% |
| Ordinary profit | 149.529 billion yen | +47.4% |
| Net income | 120.056 billion yen | +70.7% |
| Retained earnings | 413.917 billion yen | +40.9% |
| Total assets | 532.264 billion yen | +30.8% |
The operating margin is about 27.1%, and the net margin is about 22.6%.
That is very high. Rather than a simple game company, the economics look like a powerful IP licensing company, card company, retail company, and content-management company wrapped into one.
The Pokemon Company's official company profile says its businesses include producing and developing Pokemon-related video games, card games, video content, and apps; license management; and operating official shops. In other words, its revenue sources are not limited to packaged games.
This is where it differs from Nintendo itself.
Nintendo sells hardware, sells software, and earns money through online and digital channels. Hardware sales involve parts costs, inventory, pricing strategy, foreign exchange, tariffs, and other variables. Pokemon sits somewhat apart from that, bundling cards, licensing, stores, apps, video content, and overseas expansion.
Looking only at the numbers, Pokemon is already less "one division of Nintendo" and more a huge stand-alone IP company.
Where Does It Appear In Nintendo's Results?
This is the accounting core of the issue.
The Pokemon Company is not Nintendo's consolidated subsidiary. In Nintendo's annual securities report, The Pokemon Company is treated as an affiliate accounted for using the equity method. Nintendo's voting ownership ratio is 32%.
As a result, The Pokemon Company's revenue and operating profit are not added to Nintendo's consolidated revenue or consolidated operating profit.
In simplified form, the structure looks like this.
In Nintendo's earnings release for the fiscal year ended March 2026, profit from investments accounted for using the equity method was 82.7 billion yen. The previous fiscal year was 35.1 billion yen, so the increase was quite large.
This part should be read carefully.
The roughly 38.4 billion yen obtained by multiplying The Pokemon Company's 120 billion yen of net income by 32% does not match Nintendo's equity-method profit of 82.7 billion yen. Differences in fiscal year-end timing, other equity-method affiliates, consolidation adjustments, and elimination of unrealized profit can all be involved.
So it would be sloppy to call all 82.7 billion yen of Nintendo's equity-method profit "Pokemon profit."
At the same time, it is also hard to ignore that The Pokemon Company is a central presence when thinking about Nintendo's equity-method profit. If investors look only at Nintendo's operating profit, they miss this IP profit that appears below the operating line.
How To Think About Valuation
The Pokemon Company is unlisted and has no market price.
From here, this is only scenario analysis. It does not assert a specific market capitalization.
If we apply PER multiples to The Pokemon Company's 120 billion yen in net income, the rough range looks as follows.
| Assumed PER | Implied Pokemon value | Value of Nintendo's 32% stake |
|---|---|---|
| 20x | About 2.4 trillion yen | About 770 billion yen |
| 25x | About 3.0 trillion yen | About 960 billion yen |
| 30x | About 3.6 trillion yen | About 1.15 trillion yen |
The important point is not whether 25x is correct or 30x is correct.
The value changes substantially depending on how the market views Pokemon. If investors put heavy weight on the risk that the card-game boom will cool, the PER will be lower. If they view it as a complex global IP company spanning licensing, stores, apps, and video content, some investors may accept a higher multiple.
Even so, investors should keep in mind that the economic value of Nintendo's Pokemon stake can reasonably enter a discussion in the hundreds of billions of yen to 1 trillion yen range.
If you look only at Nintendo's surface PBR or PER, this part is quite hard to see.
Investments in equity-method affiliates are not completely absent from Nintendo's balance sheet. Under equity-method accounting, the book value moves as acquisition cost is adjusted by the investor's share of profit and other factors. However, The Pokemon Company is unlisted and has no market price. Even if it has value that the market might highly value on a stand-alone basis, that value is not directly marked to market in Nintendo's net assets.
In other words, there is hidden asset value here.
Why Doesn't Nintendo Make It A Wholly Owned Subsidiary?
Then, if it earns this much, why does Nintendo not simply make The Pokemon Company a wholly owned subsidiary?
That is a natural question, but reality is not that simple. Pokemon does not belong only to Nintendo. Pocket Monsters, Pokemon, and Pokemon-related trademarks are held by Nintendo, Creatures, and Game Freak, and The Pokemon Company plays the role of operating this IP across those parties.
There is actually some rationality in this structure.
If Pokemon were fully absorbed into Nintendo itself, it would inevitably be viewed through Nintendo hardware first. Of course, the core games are strongly tied to Nintendo platforms. But the actual Pokemon economic zone is much wider.
Cards, smartphone apps, video content, licensing, official shops, and overseas expansion. Having an independent operating company, The Pokemon Company, may make it easier to expand the IP outside game consoles.
From Nintendo's perspective, this is a slightly unusual asset.
It does not directly sit in operating profit. It does not sit in revenue. Even so, one of the strongest IPs in the world generates profit on a time axis separate from the hardware cycle, and part of that profit comes back through the equity method.
It is not full control, but it is not completely external either.
This distance may be one reason the Pokemon IP remains so strong.
What Changes When Looking At Nintendo Stock?
Nintendo is a game-console maker.
That is true.
But as an investment target, that is not enough. If you value Nintendo only by Switch 2 unit sales, you may underestimate its IP assets.
At the same time, overvaluing Pokemon profit is also dangerous.
The Pokemon Company's profit does not flow directly into Nintendo's operating profit. Nintendo does not own 100% of the company. There is also no guarantee that Pokemon-related profit will keep growing at the same pace. The card market boom, licensing demand, app hits, and overseas store expansion all have cycles.
So what investors should look at is not a bullish story, but a breakdown of the valuation.
| Valuation axis | Points to watch |
|---|---|
| Hardware business | Switch 2 unit sales, demand after price revisions, cost ratio |
| Software business | First-party titles, software attach rate, digital ratio |
| Online and digital | Nintendo Switch Online, additional content, ARPU |
| IP expansion | Movies, theme parks, merchandise, licensing |
| Pokemon stake | Equity-method profit, The Pokemon Company's retained earnings, unlisted IP value |
When you separate these five axes, Nintendo starts to look a little different from a simple hardware-cycle stock.
Whether the market allows Nintendo a high PER is not determined only by Switch 2 units. It depends on how thick the quality of earnings becomes as profit shifts from hardware to software, digital, IP, and equity-method profit.
Once that is visible, the discussion around Nintendo stock changes quite a lot.
Summary
The Pokemon Company's net income of more than 120 billion yen for the fiscal year ended February 2026 has become a figure that is difficult to ignore when looking at Nintendo.
However, this is not a figure that directly enters Nintendo's revenue or operating profit. Pokemon is not a consolidated subsidiary. It is an equity-method affiliate. What Nintendo sees is the non-operating form of equity-method profit.
Misunderstanding that point leads to overestimating Nintendo's earnings.
On the other hand, ignoring it completely leads to underestimating Nintendo's IP assets.
That is the difficulty of Nintendo stock.
If you follow only Switch 2 unit sales, Nintendo is a hardware-cycle stock. But if you include unconsolidated IP assets such as Pokemon, Nintendo also looks like an asset company that owns an IP portfolio.
For investors, the important thing is not to lean too far in either direction.
Use operating profit to assess the momentum of the core business. Use equity-method profit to assess contributions from affiliates, including Pokemon. Then place the potential value of unlisted IP stakes as a scenario.
Viewed in these three layers, Nintendo's corporate value becomes more three-dimensional.
The numbers on the surface do not show all of Nintendo.
That is the meaning of Pokemon's 120 billion yen in profit.
Sources And Reference Materials
- Nintendo, "IR Library: Earnings Releases" https://www.nintendo.co.jp/ir/library/earnings/index.html
- Nintendo, "IR Library: Annual Reports" https://www.nintendo.co.jp/ir/library/annual/index.html
- EDINET DB, "Nintendo Co., Ltd. Annual Securities Report Text (Status of Affiliates)" https://edinetdb.jp/company/E02367/text
- PR TIMES, "The Pokemon Company's 28th Fiscal-Year Public Notice: Financial and Settlement Information" https://prtimes.com/finance/1010401079276/settlement
- gamebiz, "Pokemon's FY ended February 2026 results: revenue up 29% to 531.4 billion yen and operating profit up 43%, marking a sharp increase in revenue and profit" (June 1, 2026) https://gamebiz.jp/news/426891
- The Pokemon Company, "Company Profile" https://corporate.pokemon.co.jp/aboutus/company/
- The Pokemon Company, "Pokemon in Figures" https://corporate.pokemon.co.jp/aboutus/figures/
This article is an investment-analysis memo based on public materials and does not recommend buying or selling any specific security. Estimates of stake value and PER-based scenarios do not guarantee future share prices or corporate value.