Probably the best outcome for the Republicans though, in my mind anyway. The Senate seat should be fairly competitive with someone like Ayotte anyway (though the primary will be a lot harder for her, and Trump could really rock the boat) and Sununu will probably be well placed to win a fourth term. If he had run for Senate, it would have still been a close race, and the race for Governor would have probably favored the Democrats (who, in the right circumstances, could also take back the State House and Senate). So on net, I think this is probably the best move for the party as a whole.
For R, a senator from NH worth much more than governor.
Besides, Ayotte would be still favored in this environment if she runs for governor.
