How to Avoid the Upcoming Microsoft 365 Price Hike Before Your Renewal

02/09/2026 • Written by: Thomas Rosquin

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Microsoft 365 licensing is already confusing on a good day, and now there’s another major price increase coming.

In a recent TrustedTech webinar, account managers Andrew Ramos and Lindsay Low broke down what’s changing on July 1, who is impacted, and (most importantly) what organizations can do to avoid paying the higher price at renewal.

5 Key Takeaways: What You Should Do Next

If your Microsoft renewal is after July 1, the key recommendations from TrustedTech are:

Review what’s changing in your current licenses: You may be getting new bundled features that replace add-ons you’re already paying for.
Consider a 3-year commitment before July 1: This is the most direct way to avoid the price increase.
Don’t upgrade blindly: Moving from E3 → E5 only makes sense if you’ll actually use the security/compliance features.
Explore add-ons as an alternative to full E5: Defender Suite + Purview Suite can be a cost-effective middle ground.
Plan for adoption after renewal: Licensing value comes from usage, not just entitlements.

Crack the M365 Code How to Increase Savings, Secure More, and Stress Less at Renewal

Here’s the full breakdown, including licensing strategy tips, renewal options, and the most innovative ways to lock in pricing before the deadline.

Why Microsoft 365 Prices Are Increasing (Again)

If your organization has been using Microsoft 365 for the past few years, you’ve probably already felt the shift. This is one of the most significant licensing increases since the major 2022 changes, when Microsoft moved most customers to the New Commerce Experience (NCE).

Since then, Microsoft has added 1,100+ features across the platform, including major updates in:

Microsoft Defender (security)
Microsoft Purview (compliance)
Copilot (AI)
SharePoint and productivity tools

Microsoft is positioning this increase as more than “just AI.” While Copilot is definitely part of the story, the broader theme is: more bundled security, compliance, and platform features baked into the core suites. Read our full breakdown of new features and capabilities here.

Who’s Impacted by the July 1 Price Increase?

The big headline: almost every core-suite SKU is affected.

This includes:

Business Basic
Business Standard
Office 365 E3 / E1
Microsoft 365 E3
Microsoft 365 E5
Frontline licenses like F1/F3

Even Government and Nonprofit customers are affected, the pricing changes will be applied proportionally based on commercial increases.

The exception?

Two SKUs were called out as not seeing an increase:

Microsoft 365 Business Premium
Office 365 E1

That’s… unusually good news in Microsoft licensing world.

What’s Actually Changing in the Licenses?

Microsoft isn’t just raising prices, they’re also bundling more features into core licenses starting July 1.

Here are some of the most significant updates:

1) Office 365 E3 and Microsoft 365 E3: New Security Included

One of the most significant changes is that Defender for Office 365 Plan 1 is being added to certain core suites (including Office 365 E3 and Microsoft 365 E3). That matters because Defender for Office helps with email and collaboration security, and many orgs currently pay for it separately.

2) Business Suite Mailboxes: 100GB Mailbox Size

If you’re using:

Business Basic
Business Standard
Business Premium

Microsoft is increasing the mailbox size to 100GB, meaning the old 50GB cap becomes much less of a headache.

3) Copilot Chat Enhancements Across Core Suites

Microsoft is also rolling out improvements tied to Copilot Chat, including:

Enhanced Copilot chat experiences
Adoption and usage analytics
More reporting visibility

This applies broadly across core suites, including F1/F3 and enterprise tiers.

4) Microsoft 365 E5: Even More Included

For Microsoft 365 E5 customers, the webinar highlighted added inclusions like:

Microsoft Cloud PKI licensing
Microsoft Security Copilot elements
Expanded Intune suite

In other words: Microsoft is leaning hard into bundling security + identity + compliance into E5.

The 3 Microsoft Licensing Tiers That Matter Most

Here is a simple framework that cuts through most of the confusion:

1) Business Premium (Best for under 300 users)

Business Premium includes:

Full productivity apps
Defender for Business
Entra ID P1 (Conditional Access)
Microsoft Intune

If your organization has fewer than 300 users, this is often the best “secure-by-default” licensing bundle without requiring third-party tools.

2) Microsoft 365 E3 (Best value for many organizations)

M365 E3 includes:

Enterprise-grade productivity apps
Baseline security + compliance
Conditional Access + Intune
More governance features
Windows 11 Enterprise

This is where most licenses currently sit, and it is the strongest ROI tier after July 1.

3) Microsoft 365 E5 (The “top of the mountain”)

E5 includes:

Advanced security analytics
Defender XDR + Sentinel
Advanced identity protection
Full Purview compliance suite
eDiscovery, audit, insider risk, etc.

It’s positioned as the “barrier” tier: most features, but only worth it if you actually use them.

Why M365 E3 Might Actually Become a Better Deal After July 1

After July 1, Microsoft 365 E3 customers are effectively getting:

Intune Plan 2
Intune Remote Help
Defender for Office 365 Plan 1
Advanced Analytics

It is estimated that if you bought those add-ons separately today, you’d pay an extra $14.50 per user/month, but Microsoft is only increasing the E3 price by about $3 per user/month.

In plain terms:

Microsoft is raising prices but also bundling more value into E3 than the increase in cost.

A Smart Alternative to Full E5: Defender + Purview Add-Ons

If you’re on Microsoft 365 E3 but don’t want to pay for full E5, Microsoft offers security and compliance add-ons.

These were formerly known as:

E5 Security
E5 Compliance

Now they’re more commonly referred to as the:

Microsoft Defender Suite
Microsoft Purview Suite

Even more interesting: Microsoft now offers versions of these add-ons specifically designed for Business Premium, letting SMBs build a “mini E5” experience at a significantly lower cost. We compare Business Premium and E3 in depth here.

Renewal Strategy: How to Avoid the July 1 Price Increase

Here are several renewal strategies TrustedTech uses with customers, especially for organizations renewing after July 1.

Strategy #1: Lock in Pricing With a 3-Year Commitment

The simplest way to avoid the price hike is to sign a 3-year commitment before July 1. This locks in the old pricing and helps customers avoid the higher rates for up to 24–30 months, depending on timing.

Strategy #2: Renew As-Is Now, Then Convert to 3-Year Before July 1

If your renewal is earlier in the year (like February or March) and budget approvals aren’t ready, you can:

Renew your existing 1-year commitment as-is
Then later (in May, for example), convert those licenses to a 3-year commitment before July 1

That lets you preserve the ability to renew without disruption, while still giving you a chance to lock in pricing later.

Strategy #3: Align Renewals With Other Tools (Email Security, Phone, etc.)

Licensing strategy shouldn’t happen in a vacuum.

If you’re considering changes like:

Moving from E3 → E5
Switching email security vendors
Replacing a phone system
Consolidating endpoint security

And then renewal timing matters. A smart licensing strategy often includes aligning renewal dates across tools so you don’t end up paying for duplicate solutions. Read our explainer on how to reduce M365 costs through licensing optimization here.