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TheMisterManGuy said:
Keep in mind, Nintendo only said sales will accelerate during holidays, not necessarily explode (which they were correct as the Variety and Vehicle Kits both saw bumps throughout November and December in Japan). I honestly don't think Nintendo sees Labo as a system seller, probably because it's too big and too complex to be one. But it is a great product for kids who already own a Switch, so Nintendo looks to be focusing on that. It's hard to tell what they expected from Labo since their marketing for it has been very weird and unconventional. We'll perhaps know its fate after the holidays are over.

Considering Nintendo was predicting 20M this FY, it's pretty easy to see that they thought that Labo would be a system seller.  They expected it to help them in the early half of the year, until they got to their heavy hitters.  It failed to do that, which is why I think it is safe to assume they will be 2M-3M below that target.