Personally, I think they should be more worried than they've ever been, because the Switch success has positioned them in an awkward spot, both in terms of future hardware and software development IMO.
My first concern for them is that they've forgotten the people like me - they need to recruit at day 1 - that bought and loved the Cube, and bought and loved the WiiU, and was there day one for the Wii and Switch, and despite not liking the later two systems as much, I still actively showed them off with friends and family that all went on to buy those two very popular outliers.
I'm not looking for a Switch 2, but a local splitscreen multiplayer Nintendo Pro console(ps4 level would do) that can companion with a Switch or Switch 2 like the WiiU tablet if need be, but primarily a console that when I fire up Mario Kart or Sports bowling, etc it doesn't become a judder mess because the processor is too weak to monitor multiple bluetooth controller connections - like the ARM chip does in the Switch - or is too weak to handle the high availability processing requirements of splitscreen gaming as seen in 3P Switch Bowling or 2P or more MK8,
Local multiplayer might not be the revenue maker for Sony and Microsoft, but just from a marketing and identity point of view for Nintendo home systems, it has been a very important part of their pitch. And the portable legacy if foisted on to their next system - which will likely be used in docked mode by the majority - will again be at odds with delivering that local multiplayer at the quality associated by Nintendo systems IMO. because portable processors will be too weak.
They seem to have also backed themselves into a lower production portable corner via the Switch's success with software development, too, and the problem with that strategy if Switch 2 is received like WiiU is that they can't easily recover to the levels of WiiU development because they are now bridging an even bigger gap than before because the Switch could never move beyond the WiiU level games for all these years, and it was already a generation behind when it launched. For Nintendo to even have their games reach AA PS4 game production level they will need large lead times IMO and they just won't be able to buy that time back.
There is also the more obvious issue that a lot of the Switch's first party software has been re-releases of software produced in the era of Iwata/Miyamoto, or the new games were poor derivatives(IMHO) and they've now sweated their old games too much now, adding more pressure for new great game ideas being needed,
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The missteps in key games like Mario Odyssey where they had game music containing sing/lyrics, and the game had lost all the sense of speed/motion from 64. Sunshine and Galaxy suggests they are going to struggle to produce new compelling gameplay Adding in gimmicks like the hat which provided really shallow gameplay IMO really exposed that Miyamoto wasn't an easy man to emulate. I also suspect that despite BotW's commercial success, moving the Zelda IP into a Assassin Creed openness will likely be a fatigue issue for gamers after the follow up with lasting damage to the franchise IMO.