Microsoft search and ad revenue up 10% to $6.55 bn in Q1

Microsoft has reported $6.55 billion in Search and advertising revenue in the first quarter of FY27, up from $5.94 billion a year earlier, as the company’s advertising business continued to grow alongside its much larger cloud and AI operations.

On a growth basis, Microsoft said Search and advertising revenue excluding traffic acquisition costs increased 12% year-on-year. The metric includes search advertising as well as revenue from LinkedIn Marketing Solutions and Premium Subscriptions, reflecting changes to the company’s reporting structure for fiscal 2027.

The advertising performance came as Microsoft reported total quarterly revenue of $92.3 billion, up 19%, while operating income rose 21% to $45.9 billion. Net income increased 32% on a GAAP basis to $36.6 billion.

The company’s Cloud business remained the main growth engine. Microsoft Cloud revenue increased 30% to $63.9 billion, while Azure revenue climbed 48% to $33.17 billion, ahead of analyst expectations. Microsoft also forecast Azure growth of 49% to 50% in the current quarter.

The quarter also underlined the scale of Microsoft’s AI investment. Commercial remaining performance obligations jumped 73% to $677 billion, while the company continued expanding data-centre capacity to meet demand for AI and cloud services.

For advertisers, the 12% growth in Search and advertising revenue is notable at a time when AI is reshaping how users discover information and how platforms monetise intent. Microsoft’s ad business now increasingly sits alongside its broader AI stack, spanning Bing, Copilot and LinkedIn rather than functioning as a standalone search-ad operation.

The reporting change also makes LinkedIn’s advertising trajectory harder to isolate quarter by quarter. While Microsoft previously disclosed LinkedIn revenue growth separately, the current framework folds LinkedIn Marketing Solutions into Search and advertising, meaning the $6.55 billion line should be read as a combined advertising-and-subscription metric rather than pure Bing ad revenue.