Microsoft Purview - Is my data processed in the cloud or on my local machine?

Hi Omer_Asking

Thank you for posting your question here! To make sure I clearly understand your question, it sounds as though you are wanting to know where the data processing occurs when you have a Microsoft Purview Sensitivity Label set to be auto-applied based on the contents of the file. Is that correct?

If so, the scanning of the file is built into the Microsoft Office application you are using at the time. This does require that your local machine has an internet connection and can communicate with the Microsoft Purview admin center as the policy is pushed out to each user's identity under the scope of the labels policy.