Microsoft Advertising is closing its demand-side platform, with the online giant informing clients the ad tech unit no longer aligns with its AI priorities according to separate Digiday sources.

Rumors of such a closure have been circulating for some time, with Microsoft Advertising contacting media buyers earlier Wednesday (May 14), informing them of the planned sunsetting of the DSP, according to two sources familiar with the developments.

One source, who asked not to be named in order to maintain relationships, said the closure of the Xandr DSP would involve multiple layoffs, with those impacted being informed on the day of the announcement. When asked to comment, Microsoft spokespeople pointed to a company blog post. They did not immediately respond when asked for clarity on the extent of the layoffs.

“Our commitment to more private and personalized advertising experiences for a conversational and agentic world is not achievable with the industry’s current DSP model and, therefore, it no longer aligns with our investment in this future,” reads a document previewed by Digiday. “As a result, we will no longer support buying media through our Invest DSP starting on February 28th, 2026.”

The document goes on to cite how Microsoft is consolidating its investments into a single AI-powered buying platform — the Microsoft Advertising Platform — claiming such developments are “critical” to its ongoing strategy.

“This is not a decision we took lightly but is consistent with our dedication to investing in the future. We are committed to a smooth transition, including platform stability and support to impacted clients,” continues the message, which was emailed to clients. “That commitment also extends to prioritizing Microsoft Curate for curated, programmatic deals, and Microsoft Monetize, our intelligent monetization platform to help drive publisher and partner business growth.”

Since acquiring Xandr from AT&T in 2021, Microsoft Advertising has significantly reshaped its strategy, particularly its retail media priorities, to reflect its broader AI-centric priorities. This includes more of a focus on its sell-side offerings, such as Microsoft Curate and Microsoft Monetize, to support curated programmatic deals for publishers.

Microsoft has also integrated generative AI into its advertising tools, enabling marketers to create images, videos, banners, and text ads using Copilot. Additionally, the company introduced a “streamlined” ad experience within Copilot, serving ads in a separate section below organic answers and utilizing an “ad voice” feature to make ads feel more natural.

In the retail media sector, Microsoft has transitioned from its proprietary PromoteIQ platform, instead preferring a partnership with Criteo, with separate sources telling Digiday it looked set to shutter the outfit, which it purchased during 2019, late last year. This collaboration allows Microsoft to leverage Criteo’s extensive retail media network, providing advertisers with broader reach.

These strategic shifts highlight Microsoft Advertising’s refocusing of its priorities on integrating AI across its advertising ecosystem, moving away from traditional ad tech models to more conversational advertising experiences, a shift it hopes will help it capture market share from rivals.

According to eMarketer forecasts, Microsoft Advertising’s revenue will surpass $17 billion this year, $9 billion of which will be generated by its Bing search engine. Such numbers would place it as the seventh-biggest advertising player behind its U.S. Big Tech cohorts and China-based outfits such as Alibaba and ByteDance.