The business is about revenue and profit. Selling more consoles certainly helps that, but it isn’t the only factor. Nintendo made a lot of money selling much less console amounts during the N64-GCN era.
You’re going to see all three companies go all in on subscriptions and recurring revenue. It’s the future, just like it has become in pretty much every other entertainment avenue. It will become less and less about selling the boxes.
Those profits came from Nintendo selling tens of millions of handheld HW, which led to tens of millions of SW sold from that HW. It definitely didn't come from underperforming home consoles.
And yes, digital subs and sales are important, but it is the combination of both that and physical retail that makes one very successful. And more boxes sold means more profit from HW and higher potential for sales of physical and digital goods.