Microsoft announced a “packaging and pricing update” for its Microsoft 365 suites (business, enterprise, frontline, and government) in December 2025. These changes took effect on July 1, 2026, with price increases as steep as 43% on some SKUs.
Consumer and education pricing remained unaffected by this update.
Pricing changes were implemented across various tiers:
Business subscriptions saw increases: Business Basic rose from $6 to $7 (16%), and Business Standard increased from $12.50 to $14 (12%). Business Premium remained at $22.
Enterprise pricing adjustments included increases for Office 365 E3 ($23 to $26, an 13% increase) and Office 365 E5 ($38 to $41, an 8% increase). Microsoft 365 E3 also increased from $36 to $39 (8%), and Microsoft 365 E5 from $57 to $60 (5%). Office 365 E1 stayed at $10.
The Frontline suites experienced the most significant increases. F1 increased from $2.25 to $3 (33%), and F3 increased from $8 to $10 (25%). Versions without Teams saw even steeper hikes, with F1 without Teams rising by 43% and Business Basic without Teams rising by 23%.
Add-ons also saw increases: Windows Enterprise per-device licensing rose by 31% ($5.85 to $7.63), and Microsoft 365 Apps per device increased by 17% ($36 to $42). Entra Plan 1 and EMS E3 also experienced double-digit increases.
Government customers, including GCC, GCC High, and DoD, saw matching percentage increases. The US AGC was untouched, and hikes above 10% for federal compliance rules are scheduled to phase in over several years.
In return for the price changes, Microsoft bundled additional features across its suites. Defender for Office 365 Plan 1 was folded into E3 tiers. Time-of-click URL scanning was added to E1, Business Basic, and Business Standard.
Various tools were integrated: Intune Remote Help, Advanced Analytics, and Plan 2 were added to E3/E5. For the E5 suite, additional features included Intune Endpoint Privilege Management, Cloud PKI, Enterprise Application Management, and Microsoft Security Copilot, which was previously sold separately (400 Security Compute Units/month per 1,000 licenses).
Business Basic and Standard received an extra 50GB of mailbox storage. Furthermore, every affected suite gained Copilot Chat enhancements, including inbox/calendar awareness and agents for Word, Excel, and PowerPoint.
Timeline details indicate that packaging changes began rolling out in June 2026 and were expected to be complete by August 1, communicated via 30-day notices through the Message Center. Customers who renewed before July 1 keep their old prices until their next renewal cycle but still receive the new features.
Skeptics argue that the “continuous innovation” justification for the increases is actually an AI tax, pointing out that Copilot and Security Copilot features are central to nearly every tier’s price adjustment.