Microsoft search advertising revenue climbs 21% in record quarter

Microsoft Corporation reported search and news advertising revenue excluding traffic acquisition costs increased 21% year-over-year to reach $13.9 billion for fiscal year 2025, according to financial documents released on July 30, 2025. The Redmond-based technology giant disclosed these results during its fourth quarter earnings announcement, marking the highest quarterly growth rate for the search advertising segment in the past three years.

"We are going through a generational tech shift with AI," said CEO Satya Nadella during the earnings call. "I have never been more confident in Microsoft's opportunity to drive long-term growth and define what the future looks like."

The substantial increase in search advertising revenue contributed to Microsoft's More Personal Computing segment generating $13.5 billion in the fourth quarter, representing 9% growth compared to the same period in fiscal 2024. According to the company's financial statements, search and news advertising has become a critical growth driver within the segment, helping offset declining revenues in other areas including Windows OEM and gaming content.

Microsoft's search advertising performance demonstrated consistent acceleration throughout fiscal year 2025. The revenue stream grew from 18% in the first quarter to 21% in both the third and fourth quarters. This sustained momentum reflects the company's successful integration of artificial intelligence capabilities across its Bing search engine and Edge browser platforms, according to the earnings transcript from July 30, 2025.

Chief Financial Officer Amy Hood emphasized during the earnings call that search advertising growth stemmed from "volume and revenue per search across Edge and Bing." The company's AI-powered search capabilities, particularly through its Copilot integration, have driven increased user engagement and advertiser demand. According to Hood, Microsoft expects search and news advertising revenue growth to moderate to "low- to mid-teens" in the upcoming quarter as "growth rates normalize following the benefit from third-party partnerships."

The search advertising gains occurred within Microsoft's broader AI transformation strategy. "All up Microsoft Cloud surpassed $168 billion in annual revenue, up 23%," Nadella noted in the earnings transcript, while highlighting the company's focus on AI platform innovation. The integration of AI technologies across Microsoft's search properties has enabled enhanced targeting capabilities and improved advertiser return on investment, contributing to the revenue growth trajectory.

Microsoft's search advertising business operates through multiple channels including Bing search results, MSN news content, and the Microsoft Advertising platform. The revenue figures exclude traffic acquisition costs paid to Bing Ads network publishers and news partners, providing a clearer view of the company's direct advertising income. According to the 10-K filing, search advertising revenue for fiscal 2025 totaled $13.9 billion compared to $12.3 billion in the previous fiscal year.

The search advertising growth contributed to Microsoft's record fiscal year performance. "This year, we delivered over $281 billion in revenue, up 15% year-over-year, which reflects the broad strength of our products and services," Hood stated during the earnings call. Total company revenue reached $281.7 billion, while operating income increased 17% to $128.5 billion. According to the financial statements, Microsoft generated $101.8 billion in net income for fiscal 2025, representing 16% growth year-over-year.

Within the More Personal Computing segment, search advertising performed significantly better than other business lines. Windows OEM and Devices revenue increased only 3%, while Xbox content and services revenue grew 13%. The disparity highlights search advertising's importance as a growth engine for the segment, which traditionally relied heavily on Windows licensing and gaming content sales.

Microsoft's advertising business has benefited from enhanced AI capabilities introduced throughout fiscal 2025. The company launched Copilot Search in Bing, which provides AI-generated summaries and conversational search experiences. According to product release documentation, Microsoft also introduced Bing Video Creator powered by OpenAI's Sora model, enabling users to generate short videos from text prompts.

The search advertising gains reflect broader market dynamics in digital advertising. According to the earnings materials, Microsoft has gained market share in search while maintaining its position as the second-largest search engine behind Google. The company's Edge browser and Bing search engine have captured increased user engagement through AI-powered features that differentiate them from traditional search experiences.

Microsoft's advertising technology platform has expanded beyond traditional search results to include native advertising, display advertising, and programmatic buying capabilities. The company operates Microsoft Audience Network, which extends Bing and LinkedIn data to third-party websites and applications. According to the earnings documentation, this multi-platform approach has enabled Microsoft to compete more effectively against larger digital advertising platforms.

The search advertising growth trajectory aligns with Microsoft's broader cloud and AI strategy. According to the earnings transcript, the company views AI as a "generational tech shift" that creates new opportunities for growth across all business segments. The integration of AI capabilities into search and advertising products has enabled Microsoft to improve user experiences while creating new revenue opportunities for advertisers.

Looking ahead, Microsoft expects continued growth in search advertising despite some moderation in growth rates. "Growth will continue to be driven by volume and revenue per search across Edge and Bing," Hood explained during the guidance portion of the call. According to the earnings guidance, the company anticipates search and news advertising revenue growth in the "low- to mid-teens" for the first quarter of fiscal 2026. This projected deceleration reflects the normalization of growth rates following the benefit from third-party partnerships that boosted results in fiscal 2025.

Microsoft's search advertising business operates in a highly competitive market dominated by Google, which maintains approximately 90% market share globally. However, Microsoft has demonstrated the ability to gain incremental market share through AI-powered innovations and strategic partnerships. According to Nadella, the company is "not anywhere close to the finish line, if at best maybe in the middle innings" of cloud migration, which continues to drive growth across all Microsoft platforms including search advertising.

The search advertising results underscore the importance of AI integration in digital advertising platforms. Microsoft's investment in AI technologies has enabled the company to differentiate its search properties from competitors while improving advertiser targeting capabilities. According to the earnings documentation, this technological advancement has translated into measurable revenue growth and market share gains.

Microsoft's advertising revenue extends beyond search to include LinkedIn's professional advertising platform and Xbox gaming advertising opportunities. According to the financial statements, LinkedIn revenue increased 9% year-over-year to $17.8 billion for fiscal 2025, while Xbox content and services generated $23.5 billion in revenue. These diverse advertising revenue streams position Microsoft as a significant player in the digital advertising ecosystem.

The search advertising growth contributed to Microsoft's strong financial position entering fiscal 2026. "We returned $9.4 billion to shareholders through dividends and share repurchases in the fourth quarter," Hood reported during the call. According to the earnings report, the company returned over $37 billion to shareholders for the full fiscal year. Microsoft's robust cash generation from its cloud, productivity, and advertising businesses provides resources for continued investment in AI technologies and market expansion initiatives.

For the marketing community, Microsoft's search advertising growth represents expanding opportunities beyond Google's dominant ecosystem. The 21% revenue growth demonstrates advertiser interest in Microsoft's AI-enhanced advertising platforms, particularly as traditional search behavior shifts toward conversational AI interactions. PPC Land has extensively covered Microsoft's advertising evolution, documenting how Copilot integration has transformed search advertising effectiveness.

The implications extend to programmatic advertising, where Microsoft's first-party data from Windows, Office, LinkedIn, and Xbox creates unique targeting opportunities. Recent PPC Land analysis highlighted Microsoft's new retail media solutions that leverage this data ecosystem for non-endemic advertising. These developments suggest Microsoft's advertising platform will continue evolving beyond traditional search advertising.

Microsoft's search advertising momentum reflects broader industry trends toward AI-powered advertising experiences. The 21% growth rate significantly exceeds traditional search advertising market growth, indicating Microsoft's AI investments are capturing advertiser interest and user engagement more effectively than conventional search approaches.

Timeline

• July 30, 2025: Microsoft announces Q4 FY25 results showing search advertising revenue growth of 21%
• June 30, 2025: Microsoft fiscal year 2025 concludes with search advertising revenue totaling $13.9 billion
• Q4 FY25: Search and news advertising revenue excluding traffic acquisition costs reaches highest quarterly growth in three years
• Throughout FY25: Microsoft integrates Copilot AI capabilities across Bing and Edge platforms driving user engagement
• May 1, 2025: Microsoft ad revenue tops $20 billion as Copilot transforms search landscape
• April 4, 2025: Microsoft launches Copilot Search in Bing, combining traditional search with generative AI
• January 29, 2025: Microsoft search ad revenue grows 21% as AI investments boost performance
• January 9, 2025: Microsoft introduces first-party data solutions for retailers expanding advertising reach
• October 31, 2024: Microsoft's search platforms show strong growth as AI integration drives revenue
• July 31, 2024: Microsoft reports strong Q4 earnings driven by cloud, AI, and ad growth

Key Terms Explained

Search Advertising Revenue: This represents income generated from advertisements displayed alongside search results on Microsoft's Bing search engine and related properties. For Microsoft, this metric excludes traffic acquisition costs paid to network publishers and partners, providing a cleaner view of direct advertising income. The 21% growth to $13.9 billion in fiscal 2025 demonstrates the increasing commercial value of Microsoft's search ecosystem as advertisers recognize the platform's enhanced targeting capabilities and user engagement levels.

Artificial Intelligence (AI): Microsoft's AI implementation encompasses machine learning algorithms, natural language processing, and generative AI capabilities integrated across its search and advertising platforms. The company's AI strategy centers on enhancing user experiences through conversational search, automated content generation, and improved advertiser targeting. This technological foundation has become the primary driver of Microsoft's search advertising growth, enabling the platform to compete more effectively against established search engines.

Microsoft Copilot: This AI-powered digital assistant transforms traditional search interactions into conversational experiences, providing synthesized responses and contextual recommendations. Copilot integration across Bing and Edge has fundamentally altered user search behavior, moving beyond keyword-based queries toward natural language conversations. The technology enables Microsoft to capture user intent more effectively while creating new advertising opportunities through AI-generated content and personalized recommendations.

Traffic Acquisition Costs (TAC): These expenses represent payments Microsoft makes to third-party publishers, network partners, and content providers who display Bing search results and advertisements. By reporting revenue excluding TAC, Microsoft provides investors and advertisers with a clearer understanding of the direct profitability of its search advertising business. The TAC-excluded revenue growth of 21% indicates strong underlying performance independent of partnership arrangements.

Bing Search Engine: Microsoft's search platform serves as the foundation for the company's search advertising business, competing primarily against Google in the global search market. Despite maintaining approximately 5% global market share, Bing has demonstrated consistent growth through AI-powered features and strategic partnerships. The platform's integration with Windows, Edge, and Office products provides Microsoft with unique distribution advantages and first-party data access for enhanced advertising targeting.

Edge Browser: Microsoft's web browser serves as a key distribution channel for search advertising and AI-powered experiences. Edge's integration with Copilot enables contextual advertising opportunities and enhanced user engagement through AI-assisted browsing. The browser's growing user base contributes directly to search advertising revenue growth by providing additional inventory and targeting data for Microsoft's advertising platform.

Revenue Growth: The 21% increase in search advertising revenue represents Microsoft's strongest performance in this segment over the past three years, reflecting successful AI implementation and market share gains. This growth rate significantly exceeds traditional search advertising market expansion, indicating Microsoft's AI investments are capturing advertiser interest more effectively than conventional approaches. The sustained growth trajectory demonstrates the commercial viability of AI-enhanced advertising platforms.

Fiscal Year 2025: Microsoft's financial reporting period from July 1, 2024, to June 30, 2025, during which the company achieved record search advertising performance. This timeframe encompasses the major AI technology rollouts, Copilot integration initiatives, and strategic partnerships that drove advertising revenue growth. The fiscal year results provide a comprehensive view of Microsoft's advertising business transformation through AI implementation.

More Personal Computing Segment: This Microsoft business division encompasses Windows operating systems, devices, Xbox gaming, and search advertising operations. The segment generated $13.5 billion in Q4 FY25, with search advertising serving as a key growth driver offsetting declines in other areas. The segment's performance demonstrates how AI-powered search advertising has become increasingly important to Microsoft's consumer-focused business operations.

Market Share: Microsoft's search advertising market position reflects the company's ongoing competition with Google and other digital advertising platforms. While maintaining a smaller overall market share, Microsoft has demonstrated the ability to gain incremental share through AI-powered innovations and strategic partnerships. The company's focus on AI-differentiated search experiences positions it to potentially capture additional market share as search behavior evolves toward conversational interactions.

Summary

Who: Microsoft Corporation, led by CEO Satya Nadella and CFO Amy Hood, reported the financial results during the July 30, 2025 earnings announcement.

What: Microsoft's search and news advertising revenue excluding traffic acquisition costs increased 21% year-over-year to $13.9 billion for fiscal year 2025, driven by AI integration across Bing and Edge platforms.

When: The results cover Microsoft's fourth quarter and full fiscal year 2025, which ended June 30, 2025, with the earnings announcement made on July 30, 2025.

Where: The growth occurred across Microsoft's global search advertising platforms including Bing search engine, Edge browser, and MSN news properties, with particular strength in AI-enhanced search experiences.

Why: The revenue growth resulted from increased search volume and higher revenue per search driven by Microsoft's integration of Copilot AI capabilities, which enhanced user engagement and advertiser targeting effectiveness compared to traditional search advertising approaches.