LinkedIn posts first $10 billion year, 5 years after Microsoft deal, but profits remain a mystery

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Microsoft’s biggest acquisition just joined the ranks of its biggest businesses.

Five years after Microsoft announced its intent to acquire LinkedIn for more than $26 billion, the business social network has surpassed $10 billion in annual revenue for the first time. Microsoft announced the milestone Tuesday afternoon in conjunction with its fiscal fourth quarter earnings report.

LinkedIn revenue rose 46% for the quarter to nearly $3 billion.

On a conference call with analysts, Microsoft CEO Satya Nadella called it “a testament to how mission-critical the platform has become to help people connect, learn, grow and get hired over the course of their careers.”

It’s also a testament to the power of multiple revenue streams. LinkedIn makes money from both subscriptions and advertising.

In the latter category, Microsoft said LinkedIn’s quarterly advertising revenue surpassed $1 billion for the first time in the recent quarter, up 97%. In the past year, LinkedIn has benefitted in part from advertisers shifting spending from Facebook.

In this Microsoft photo from 2016, Jeff Weiner, left, who was then LinkedIn’s CEO, poses with Microsoft CEO Satya Nadella, center, and LinkedIn co-founder Reid Hoffman, who has since joined the Microsoft board.

“In the past five years since our acquisition, revenue has nearly tripled and growth has accelerated,” Nadella said Tuesday afternoon. “LinkedIn has become a leader across multiple secular growth areas spanning B2B advertising, professional hiring, corporate learning and sales intelligence.”

That’s about as close as Nadella gets to a victory lap.

LinkedIn was a huge bet, early in his tenure as Microsoft CEO. It was also his chance to salvage Microsoft’s mergers-and-acquisitions track record following multi-billion-dollar write-offs taken by the company on the Nokia and aQuantive deals that were completed under Nadella’s predecessor, Steve Ballmer.

At the time, Nadella cemented the deal with Jeff Weiner, then LinkedIn’s CEO, by promising the company independence as an operating unit inside Microsoft.

Still, on the call Tuesday afternoon, Nadella made it clear that LinkedIn’s independence hasn’t kept it from working with other parts of Microsoft. He cited as examples LinkedIn’s integrations with Office, Dynamics 365 and the new Microsoft Viva employee experience platform.

The $10 billion revenue threshold is considered a key milestone of success inside Microsoft. Other businesses that have crossed that threshold in recent years at the company including gaming and security.

However, even with all the growth, it’s not clear if LinkedIn is profitable, at least not officially.

Microsoft stopped reporting LinkedIn’s operating profits publicly in its 2019 fiscal year. LinkedIn was profitable earlier in its life as a standalone public company, before posting a $165 million loss on $3 billion in revenue in 2015, the year prior to the Microsoft acquisition.

LinkedIn ran at a loss initially inside Microsoft due to long-term costs associated with the acquisition, as we reported at the time. But the business looked to be on a trajectory toward profitability before Microsoft stopped disclosing LinkedIn’s operating profits.

Announcing the latest results Tuesday afternoon, Nadella said LinkedIn now has 774 million members, and user sessions were up 30% in the quarter compared with a year ago.

RELATED: Microsoft profits rise 47% to $16.5 billion in June quarter, soaring past Wall Street expectations

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