Dive Brief:
- Microsoft plans to increase commercial pricing for Microsoft 365 suite subscriptions starting July 1, 2026, the company announced Thursday.
- The price increases are due to expanded availability of AI, security and management capabilities coming to Microsoft 365 offerings starting next year, the company said. While most products will see an average price increase of about 16%, Business Premium and Office 365 E1 prices will remain unchanged.
- “These changes reflect our commitment to helping organizations of every size protect their people and data, streamline IT operations, and confidently embrace the future of work,” Nicole Herskowitz, corporate VP of Microsoft 365 and Copilot at Microsoft, wrote in a post announcing the price hikes.
Dive Insight:
Microsoft is the latest tech company to tie its price increases to AI features incorporated into its products.
Salesforce in June said it would increase the price of products, including Agentforce, Customer 360 apps and Slack, to provide customers with AI embedded into daily Salesforce and Slack operations, as well as unmetered Agentforce usage.
Prices will continue to increase as AI becomes embedded into enterprise products, said Tiffany McCormick, research director of AI monetization, pricing strategies and business models at IDC. However, higher prices mean AI features must “deliver the cost savings, productivity gains and revenue impact that buyers prioritize.”
“AI capabilities come with substantial cost drivers, from cloud compute to model updates and integration, and Microsoft’s move reflects a reality that many vendors will follow,” McCormick said in an email to CIO Dive. “But CIOs and executives are concerned with ROI and are signaling that realistic ROI expectations must justify the pricing premium.”
Microsoft said its price increases reflect the ongoing implementation of AI into its products, pointing to the release of Microsoft 365 Copilot Chat in products like Word, Excel, PowerPoint, Outlook and OneNote. More than 90% of Fortune 500 companies are already using the company’s generative AI chatbot, Microsoft said.
The company will also make Microsoft Security Copilot available to all Microsoft 365 E5 customers as part of the pricing update. Microsoft Security Copilot, which hit general availability in April 2024, provides built-in AI agents for security teams to assist with threat investigations.
Starting in January 2026, customers will start to see “agent mode” inside the gamut of Microsoft products, Rajesh Jha, EVP of experiences and devices at Microsoft, said during the UBS Global Technology Conference Tuesday.
“It’s one thing to go and say there’s AI off on the side, which I think is a very interesting user experience because you get to express your intent in a natural language,” Jha said, according to a transcript from the conference. “But then to be able to take that same capability and bring that to existing workflows that hundreds of millions of people are already on with a graphical user interface and have those two coexist, I think the agent mode is going to be a big unlock.”
Enterprise spend on AI applications, infrastructure software and services will account for nearly one-third of the AI market – valued at more than $2 trillion – in 2026, according to Gartner. The analyst firm found that enterprise investments in AI application software, which includes CRM and ERP, could reach as high as $270 billion.
