A company has a Microsoft 365 tenant with the domain contoso.com. They acquire a subsidiary with the domain fabrikam.com and want to add it as an additional domain to the same tenant. The domain is already purchased and DNS management is available. What is the first step the administrator should take in the Microsoft 365 admin center?
Domain verification via TXT record is always the first step when adding a custom domain.
Why this answer
To add an existing domain like fabrikam.com to a Microsoft 365 tenant, the first step is to add the domain in the Microsoft 365 admin center and then verify ownership by adding a TXT record to the domain's DNS zone. This verification proves the administrator controls the domain, which is a prerequisite for using it with Microsoft 365 services such as Exchange Online or SharePoint.
Exam trap
The trap here is that candidates may confuse the order of operations and attempt to configure advanced features like federation or email routing before completing the mandatory domain verification step, which is always the first action required when adding a new domain to a tenant.
How to eliminate wrong answers
Option B is wrong because creating a new tenant for fabrikam.com would isolate the subsidiary's users and resources from the existing contoso.com tenant, defeating the purpose of consolidating domains under one tenant. Option C is wrong because email forwarding from contoso.com to fabrikam.com is a post-verification routing configuration, not a domain addition step, and it does not establish domain ownership. Option D is wrong because converting fabrikam.com to a federated domain requires the domain to first be added and verified in the tenant; federation is an advanced authentication configuration that cannot be performed as the initial step.