Microsoft's commercial pricing for Microsoft 365 changed on July 1, 2026, and the rollout of what came with it finished on August 1. List prices moved 5 to 43 percent depending on plan, with Microsoft 365 E5 going from $57 to $60 per user per month and Frontline F1 with Teams rising from $2.25 to $3.00, a 33 percent jump. Microsoft announced the change on December 4, 2025, giving customers roughly seven months of notice before it hit.
Microsoft's own framing is not "price increase." It is "packaging and pricing update." Most tiers now include baseline Copilot Chat, meaning inbox and calendar awareness plus Word, Excel and PowerPoint agents, folded into the base subscription rather than sold as an add-on. E5 customers also gain Microsoft Defender for Office 365 Plan 1, Intune Remote Help, Intune Advanced Analytics, Intune Plan 2, Intune Privilege Management, Microsoft Cloud PKI and Intune Application Management, with that portion of the rollout completing by August 1.
That is a real argument, not a fig leaf. Organizations already buying Defender for Office 365 or Intune add-ons separately may come out ahead on the bundle math. But it is also a choice about which number gets reported. "5 to 43 percent" is a price increase. "New security and AI capabilities added to your subscription" is a value story. Both describe the same invoice.
The second change nobody bundled with anything
The July repricing did not arrive alone. On November 1, 2025, Microsoft removed the volume discount tiers, known as Levels B, C and D, from Enterprise Agreements, MPSA and OSPA contracts. Every organization now pays Level A list price for online services regardless of seat count. Previously, buying at scale earned an automatic discount band. Directions on Microsoft put the affected threshold at organizations with 2,400 or more cloud seats, with large enterprises seeing 6 to 12 percent increases from the discount removal alone, stacked separately from the July packaging change.
For a large enterprise renewing in the second half of 2026, these are two distinct cost events landing on the same contract cycle: a list price increase justified by new features, and a discount structure that quietly disappeared eight months earlier. Neither event, read alone, looks alarming. A 5 percent E5 increase with new security tooling attached is defensible. Together, on a 25,000-seat renewal, they compound into a materially different number than either one suggests on its own.
This is not just a Microsoft story
The pattern is broader than one vendor. Salesforce restructured Agentforce billing around Flex Credits, a consumption model priced at $500 per 100,000 credits with each standard action consuming roughly $0.10, alongside its existing per-user and per-conversation options. The mechanism is different from Microsoft's bundling, but the effect on the buyer is the same: the unit you are billed against changes, and the old method of comparing "price per seat, year over year" stops producing a clean answer. When the billing unit moves from seats to credits, or from a flat tier to a tier with new inclusions, a renewal negotiation can no longer be settled by comparing last year's line item to this year's.
Coverage of the Microsoft change, including analysis from outlets tracking the rollout, has split between reading it as legitimate value expansion and reading it as what one analysis called an "AI tax," spreading the cost of Microsoft's AI infrastructure buildout across the entire commercial base whether or not a given customer uses Copilot. Both readings can be true for the same price change. The capabilities are real. So is the fact that a customer who has no use for Security Copilot or the bundled Intune modules is still paying for the container they arrived in.
What this means at the negotiating table
The buyer-side lesson is not that bundling is illegitimate. It is that "percent increase" is no longer a sufficient unit of analysis for an enterprise SaaS renewal, because the percentage is calculated against a package that changed at the same time the price did.
Three things follow for procurement and IT asset management teams working a renewal in this environment. First, separate the list price change from any discount structure change and model them independently, because they often land at different times on different notice cycles, as they did here with the November 2025 EA discount removal preceding the July 2026 packaging update. Second, price out the newly bundled capabilities as if they were still standalone add-ons, using the vendor's own historical add-on pricing where available, to see whether the bundle is actually cheaper than what was being paid before, or just differently priced. Third, do not assume a multi-year agreement signed before the change protects the full contract term. Microsoft's FAQ states that existing customers keep current pricing until renewal, which means the protection is time-limited, not permanent, and worth calendaring explicitly rather than assuming.
None of this requires treating Microsoft, or any vendor doing something similar, as acting in bad faith. Adding security tooling and AI features to a base tier is a legitimate way to compete. But when a pricing change and a packaging change are announced and rolled out together, the honest response from the buyer side is to price them apart before deciding whether to accept them together.
Sources
- Microsoft, "Microsoft 365 Packaging and Pricing Updates" - https://www.microsoft.com/en-us/licensing/news/2026-m365-packaging-pricing-updates
- Microsoft, "Microsoft 365 Packaging and Pricing Updates Public FAQ" - https://www.microsoft.com/en-us/licensing/news/2026-m365-packaging-pricing-updates-faq
- Directions on Microsoft, "Microsoft Is Dropping EA Volume Discounts Starting in November 2025" - https://www.directionsonmicrosoft.com/microsoft-is-dropping-ea-volume-discounts-starting-in-november-2025/
- Wavenet, "Microsoft is removing EA volume discounts, what you need to know" - https://www.wavenet.co.uk/blog/microsoft-ends-ea-volume-discounts
- Salesforce, "Salesforce Introduces New Flexible Agentforce Pricing to Accelerate the Digital Labor Revolution" - https://www.salesforce.com/news/press-releases/2025/05/15/agentforce-flexible-pricing-news/
- Let's Data Science, "Microsoft Raises Microsoft 365 Prices While Bundling Copilot Chat" - https://letsdatascience.com/news/microsoft-raises-microsoft-365-prices-while-bundling-copilot-42dc3b9a