Remember when everyone said Microsoft overpaid for LinkedIn? Nearly a decade later, the $26.2 billion “overpriced” acquisition now generates that much in revenue every 15 months.
As Wall Street obsessed over Microsoft’s Azure growth rates and OpenAI accounting, LinkedIn quietly crossed $5 billion in quarterly revenue for the first time in the Redmond company’s December quarter, up 11%. That puts the business social network on an annual run rate of more than $20 billion.
Although LinkedIn is known for its recruiting tools and job postings, Microsoft said the latest growth is being fueled by LinkedIn Marketing Solutions, its advertising business.
On Microsoft’s earnings call with analysts, CEO Satya Nadella noted that paid video ads on LinkedIn grew 30% year-over-year. That came amid the platform’s push into short-form video, a format pioneered by TikTok that LinkedIn has adapted for professional content, such as career advice, industry hot takes, and company announcements delivered in vertical clips.
He noted that LinkedIn had double-digit member growth for the quarter. The platform had nearly 1.3 billion members as of October, according to Microsoft’s first quarter earnings call.
Premium subscriptions crossed $2 billion in annual revenue for the first time a year ago, Microsoft said at the time, with subscriber growth up nearly 50% over the prior two years.
The company doesn’t report profits for individual units. LinkedIn sits within Productivity and Business Processes, which also includes Microsoft 365 and Dynamics. That segment posted $20.6 billion in operating income on $34.1 billion in revenue, a 60% operating margin.
Other than that, Microsoft’s financials don’t provide much of a window into LinkedIn.
However, a footnote in Microsoft’s 10-Q filing points to a potential cloud on the horizon: a contested €310 million (about $335 million) fine from Ireland’s Data Protection Commission.
The October 2024 ruling found that LinkedIn violated GDPR, the European Union’s data privacy law, by using member data for behavioral analysis and targeted advertising. Regulators determined that LinkedIn’s consent mechanisms were not “freely given” or “sufficiently informed,” and ordered the company to bring its data processing into compliance.
LinkedIn has said it believes it complied with the law and is appealing the decision. A preliminary hearing was held in December.
Microsoft has taken a reserve charge covering the potential penalty. But the fine itself isn’t the big issue. If the appeal fails, LinkedIn could be forced to overhaul advertising algorithms for Marketing Solutions, the same business line currently driving its growth.
RELATED STORY: Microsoft beats expectations, cloud tops $50B as OpenAI and Anthropic deals reshape its business
Read the full article here
