Microsoft announced its biggest commercial Microsoft 365 pricing update since 2022 in December 2025, with a seven-month runway before the changes land. The deadline is now six weeks away, and Microsoft resellers report that many of their customers are yet to act. Strategic Micro Systems, which has managed Microsoft 365 licensing for hundreds of businesses since 2002, says:
"The price increase is not a surprise anymore. What is still catching businesses off guard is not having a plan before the deadline hits."
The increases take effect on 1 July 2026. They range from modest on enterprise tiers to significant on business and frontline plans, and they compound with the volume discount removal Microsoft introduced in November 2025. For large enterprises, the two changes together produce a materially larger cost increase than the headline SKU percentages suggest.
What Is Changing on 1 July 2026
Microsoft's official pricing and packaging page confirms the following US list price changes:
- Business Basic: $6 to $7 per user/month (+16.7%)
- Business Standard: $12.50 to $14 per user/month (+12%)
- Business Premium: unchanged at $22 per user/month
- Office 365 E1: unchanged at $10 per user/month
- Office 365 E3: $23 to $26 per user/month (+13%)
- Microsoft 365 E3: $36 to $39 per user/month (+8.3%)
- Microsoft 365 E5: $57 to $60 per user/month (+5.3%)
Frontline plans take the heaviest hit. Microsoft 365 F1 rises 33% with Teams included and 43% without it. F3 goes up 25% with Teams. Standalone Microsoft Teams and standalone Copilot licences are not part of this update.
Microsoft framed the increases around the investment it has made in the platform since 2022, citing over 1,100 features added in that time. In its December blog post, the company said:
"Organizations face an increasingly complex threat landscape, rising IT demands, and the urgent need for AI-powered transformation. To help our customers meet these challenges head-on, we're enhancing our Microsoft 365 offerings with additional security and management capabilities empowered by AI."
The broader intent is clear from what CEO Satya Nadella told investors at a Morgan Stanley conference in May. He described Copilot as a "coworker": a persistent enterprise layer that builds intelligence over time. On the data layer beneath Microsoft 365, Nadella told the audience:
"Think of Work IQ as our frontier model. It's basically the data plus the model embedded together. That's what the CIOs see the value of."
Nadella also told investors he now looks at "all agents as users," signalling that Microsoft's licensing model is being built to extend to autonomous AI agents as well as human workers. The July price increase is part of that repositioning.
What Microsoft Is Adding to Justify the Cost
Alongside the price changes, Microsoft is bundling new capabilities into existing tiers between June and August 2026. For organisations currently buying equivalent tools separately, some of these represent a genuine cost offset.
Business Basic and Standard customers gain 50GB of additional email storage, URL time-of-click phishing protection, and Copilot Chat enhancements across Word, Excel, PowerPoint, Outlook, and OneNote. E3 customers gain Microsoft Defender for Office 365 Plan 1, previously a $2 per user per month add-on, along with Intune Remote Help and Advanced Analytics. E5 customers gain Security Copilot agents, Intune Endpoint Privilege Management, Enterprise Application Management, and Microsoft Cloud PKI.
For organisations running a non-Microsoft security stack, the bundling is less convincing. SAMexpert's licensing analysis notes:
"Those running CrowdStrike, SentinelOne, or another endpoint vendor have no use for a bundled Microsoft alternative they never asked for. The honest answer for most E3 customers is that Microsoft has added security features you did not request and will now charge you for them."
The bundled Copilot Chat features arriving in June are also not the full Microsoft 365 Copilot licence, which remains a separate $30 per user per month. As our Copilot ROI analysis from Ignite 2025 noted, organisations that invest seriously in Copilot Studio face Azure consumption costs that can significantly exceed base licensing spend.
