TLDR
- Microsoft announces commercial Office 365 price increases taking effect July 1, 2026
- Front-line worker subscriptions surge 33%, jumping from $2.25 to $3 per user monthly
- Business Basic rises 16.7% to $7 while Business Standard climbs 12% to $14
- Enterprise E3 and E5 plans see 8-13% increases across subscription tiers
- Company cites 1,100+ new features and platform improvements to justify pricing changes
Microsoft confirmed Thursday it’s raising commercial Office 365 subscription prices starting July 1, 2026. Business and government customers across all tiers will pay more.
This represents the second commercial price adjustment in four years. The last increase came in 2022.
Front-line workers face the steepest costs. Microsoft 365 F1 plans surge 33% from $2.25 to $3 per user each month. F3 subscriptions climb 25% from $8 to $10.
Small and medium businesses see double-digit jumps. Business Basic moves to $7 from $6, a 16.7% increase. Business Standard rises 12% to $14 from $12.50.
Only Business Premium remains unchanged at $22 monthly. Enterprise-level Office 365 E1 holds at $10.
Enterprise Plans Get Moderate Bumps
Larger organizations face smaller percentage increases. Office 365 E3 rises 13% to $26 from $23. Microsoft 365 E3 including Windows climbs 8.3% to $39 from $36.
The top-tier E5 package increases 5.3% to $60 from $57 per user. Government clients will experience similar percentage changes rolled out per local regulations.
Nicole Herskowitz, Microsoft’s corporate vice president for Microsoft 365 and Copilot, explained the reasoning. She pointed to continuous platform investment and more than 1,100 features released in the past year.
Those features span Microsoft 365, Security, Copilot, and SharePoint. The company argues these additions justify higher subscription costs.
Google Competition Heats Up
Microsoft’s productivity apps face increasing pressure from Google’s competing tools. The battle for enterprise customers has intensified over recent years.
Word, Excel, PowerPoint, and Outlook remain market leaders. But Google has made steady gains in the productivity software space.
The price increases arrive as Microsoft doubles down on AI integration. Copilot, the company’s AI assistant, costs an extra $30 per month. It’s sold separately from standard subscriptions.
Corporate adoption of Copilot varies widely. Some companies have deployed it across their organizations while others remain hesitant.
Microsoft renamed Office 365 to Microsoft 365 in 2020. The original Office 365 subscriptions launched in 2011. Consumer subscriptions increased in January 2025 for the first time in over a decade.
Many businesses receive discounts below list prices. Microsoft has reduced direct volume deals for certain customer segments though.
Revenue Impact on Microsoft
The Productivity and Business Processes division accounts for nearly 43% of Microsoft’s total revenue. This segment brought in $33.4 billion of the company’s $77.7 billion first-quarter earnings.
Microsoft 365 commercial cloud services revenue jumped 17% in October. User seats grew 6%, driven mainly by small business, medium business, and front-line worker products.
All subscription tiers exclude the $30 Copilot add-on. The AI assistant remains optional across all pricing levels.
Government customers will see staggered implementation. Timing depends on existing contracts and regulatory requirements in different regions.
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