Revenues from mobile gaming are expected to see 25.6 percent annual growth to 2017 compared with a 22.5 percent year on year fall in handheld video games sales, according to Gartner, which analysts said would hit Nintendo's 3DS device.
"The handheld device market is pretty much shrinking because smartphones have the same screen size and you cannot use the device for anything else other than gaming," Eva Hunyadi, research analyst at Juniper Research, told CNBC in a phone interview.
"Handheld games are shrinking and probably going to get close to exiting the market by 2019."
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But Nintendo is eyeing up 12 million 3DS sales by March next year and said in its earnings release that it expects to generate "robust profits" from this business.
Toys to save Nintendo?
Nintendo remains bullish on its prospects and confirmed its full-year operating profit guidance of 40 billion yen. The company's stock has dropped 12 percent from the start of the year.
But it could be an unlikely product that will save Nintendo – toys. The Japanese firm is set to release a series of "amiibo"; figures of characters such as Super Mario that can be scanned onto the Wii U control pad and appear in the game.
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This could revitalize the Wii U console, according to Piers Harding-Rolls, head of games at IHS.
"They have a number of interesting products coming to market like products in the toy categories and are doing something innovative there," Harding-Rolls told CNBC in a phone interview.
"The game space is all about momentum and if they can continue to roll out interesting software the momentum can continue."
- By CNBC's Arjun Kharpal