Well, Nintendo plans to sell 12 million DS's, 11 million GBA's, and only 2.4 million Gamecubes this year, so that should tell you where the hardware sales are. They're forecasting overall net profit (hardware and software) at $631 million on $3.4 billion in sales.
Of course, it's also noteworthy that same-year profits have dropped significantly. That is, comparing the first half of fiscal year 2005 to the same period in 2004, net profits are down 21%. Looking at the same periods, Gamecube sales are down from $139 million to $71 million. Software sales are also down, for both the GC and handhelds (though much more markedly for the console).
Yes, Nintendo is still pulling a profit. Yes, their profits are dropping sharply. Yes, their software sales are more stable than hardware sales. Yes, we are entering a new generation of console hardware which may have an effect on hardware sales. No, Nintendo cannot afford declining profits indefinitely.