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curl-6 said: SFZ was still made in conjunction with Platinum, Metroid 2 3DS with Mercury Stream, Fire Emblem Warriors to Omega Force, even this year games like Kirby Star Allies and Mario Tennis Aces were made by external teams Camelot and HAL. EPD haven't put out a major game since Mario Odyssey 10 months ago.

ARMS 2 would simply be a poor use of finite resources. It has limited commercial potential and there isn't any real demand for it. Nintendo fans aren't clamouring for a sequel, they've almost all moved on and forgotten about the IP.

Kirby and Mario Tennis were created by HAL and Camelot respectively so you can't outsource something that was never made in-house to begin with, and Fire Emblem Warriors was a crossover spin-off. Those aren't very good examples really. EPD's last release wasn't Mario Odyssey, ignoring WarioWare Gold (which was a collab with IS as always), their next title is Nintendo Labo: Toy-Con 3 - Vehicle Kit. It's funny how we're not talking about Labo here, because that's the biggest thing EPD has this year. True it's not selling like Mario Odyseey, but it's got modest sales under its belt, and Nintendo is willing to keep it going. It goes back to what I said earlier. It's not that EPD doesn't have enough resources, it's that they focused almost entirely on the Switch's first year, and didn't start working on future games until after the console was an official success. Anything EPD has in the works now, is a year away at this point, but it's likely to be even more prolific than last year's output. 2017 had 6 games from them on Switch. With the 3DS staff now freed up, their output could be increased by one or two games. 

Also, I don't really buy that Nintendo fans don't want ARMS 2. It still enjoys a healthy following with a decent competitive scene and regular fan-art, among other things. It's definitely enough for Nintendo to consider a sequel.