SharePoint Online Adds Support for Sensitivity Labels with User Defined Permissions

SharePoint Online will add support for files protected with user-defined permissions from March 2025. This step will enable support for Microsoft Search, DLP, eDiscovery, and content searches, but only for files processed by Microsoft Search. Processing happens automatically when new files are created or existing files are edited, so making all UDP-protected files searchable will take some time. Indexing doesn’t make UDP-protected files available to Copilot.

https://office365itpros.com/2025/02/27/user-defined-permissions-labels-spo/