Nintendo's Sales Fell 9.5% and Profit Rose 150%: Tariff Refunds

When two numbers in a quarterly report move in opposite directions, the difference is usually not the business. In Tokyo on August 6 the picture was exactly that.

Nintendo's net sales were down 9.5% while operating profit was up 150.5%, to ¥142.5 billion. Switch 2 sales of 3.82 million units marked a 34.4% decline.

The item that made the difference sat in the footnotes. Roughly $300 million in tariff refunds from U.S. Customs was booked not as "other income" but as a direct reduction of cost of sales.

The stock rose 9.43% the next day.

Apple booked $2.19 billion in refunds, Nike $986 million, Deere $272 million — the first earnings season tinted throughout by one non-recurring item.

A February Ruling, an August Earnings Season

On February 20, 2026 the Supreme Court ruled 6–3 on the International Emergency Economic Powers Act of 1977 — IEEPA. The law gives a president no power to impose tariffs of indefinite scope.

The ruling voided duties imposed since February 2025 by ten executive orders on Canadian, Mexican, Chinese, Brazilian and Indian goods.

Per the Penn Wharton Budget Model, cumulative IEEPA revenue reached $164.7 billion through January 2026 — roughly $500 million a day, about half of U.S. customs revenue.

The ruling did not send the money back. It left a refund process spanning more than 53 million entries and 330,000 importers. Customs built CAPE, covering roughly 63% of affected entries from April 20, 2026.

Refunds are not automatic: the importer must file, document and register for payment. Claims are paid in 60 to 90 days.

Nintendo did not wait. On March 6, 2026 it sued the U.S. government for its duties with interest.

Apple was plain about it: gross margin came in at 50.1%, including roughly 2 points from refunds. Deere's $272 million sat in production cost, lifting equipment margins about 2.5 points.

The Mechanism: Why Profit Doubles While Revenue Falls

Nintendo's operating profit a year earlier was roughly two fifths of the ¥142.5 billion just reported. On a base that low a one-time recovery produces a 150% increase.

This is where the mistake gets made. Apply the new 35% gross margin to next year's revenue and you model an extra 5 of profit every quarter, when the real margin is still 30%. Over ten years that makes a company look half again as profitable: What Is Valuation?

The Market Did Not Do the Same Subtraction Everywhere

Apple's numbers were the cleanest: EPS was $2.02 against a $1.89 estimate. But 11 cents of that 13-cent beat came from tariff refunds. That is $1.91 without them, roughly 85% of the beat unrelated to the business.

The market did the subtraction. Apple fell about 7% the next session, erasing some $350 billion of market value, after guiding to 9–11% September-quarter revenue growth against the 12% expected.

Deere went the same way: EPS of $6.55 beat the $5.70 estimate by 15% and the stock still fell 5%. Management had flagged tariff exposure of about $1.2 billion for the year, a drag of roughly 3 points on equipment margins. Nintendo went the other way and rose 9.43%.

The name at the bottom is most instructive. Warby Parker closed the quarter with net income of $4.6 million against a refund of $11.8 million — without it, a loss.

Meanwhile FedEx returned its roughly $800 million to the shippers who paid the duty.

What Is Left

First, the job is not done. The $71.06 billion paid through June 29 is about 68% of the $104.29 billion authorized. Approved refunds cover only 30% of entries by the Cato Institute's count — nearly 60% of the dollars owed.

Large importers got paid first.

Second, the litigation is not closed. The Justice Department appealed on June 3, arguing that only importers who sued deserve refunds on finally liquidated entries. If that prevails, roughly $30 billion is at risk for companies that never sued.

Third, the tariffs did not go away.

That is why the refund is a timing difference, not an improvement in profitability. Nintendo said higher component prices — memory above all — with continuing tariffs could add roughly ¥100 billion (about $680 million) to cost of sales this year.

Three hundred million came back this quarter, and more than twice that is expected to go out next year. The full-year operating profit forecast stayed at ¥370 billion.

FactSet shows blended earnings growth of 37.9%, the highest since the third quarter of 2021, with 86% of companies beating estimates against a 78% five-year average.

The same data shows how far one company bends the picture: strip out Alphabet's $98 billion valuation gain and index earnings growth falls from 37.9% to 25.9%.

Tariff and refund figures in this piece come from the Penn Wharton Budget Model, the Cato Institute, and legal notes from Skadden and Holland & Knight; company figures come from Nintendo's, Apple's and Deere's own disclosures and from reporting by The Japan Times, Bloomberg and FactSet. Refund amounts on finally liquidated entries may change while the appeal is pending. Aggregate refund estimates circulating on social media were not used, as they carry no verified source.

Correction (September 13, 2026): prose tightened for rhythm; figures and sources unchanged.