Microsoft 365 Price Increases for 2026: How Current Discounts Can Lock In Savings Now

Microsoft has officially announced a global pricing update for Microsoft 365 and Office 365 commercial subscriptions, effective July 1, 2026. This update will impact nearly every plan, spanning Business, Enterprise, and Frontline licenses, with list price increases taking effect for new purchases and renewals after the specified date. These changes arrive alongside a wave of new capabilities: Microsoft released over 1,100 new features across the Microsoft 365 suite in the past year, incorporating advanced AI, security, and management tools into existing plans.

Key Takeaways

• Delay impacts with a renewal before July 1, 2026: You can renew under current pricing and potentially leverage promos.
• Forecast now: Build these added costs into your 2026 and 2027 IT budgets to avoid surprises at renewal.
• Biggest promo opportunity: Purchase Microsoft 365 E5 Compliance licenses at a 50% discount with the purchase of a Microsoft 365 Copilot license.
• Maximize savings: Early renewal + promos can meaningfully reduce total cost.

For IT decision-makers, this means two things: bigger bills ahead, and more value bundled into the core Microsoft 365 offerings. It also means now is the time to prepare by understanding the details of the price changes, the reasons behind them, and the promotions available to offset the impact. Below, we break down what’s changing and how you can respond.

Microsoft 365 Price Changes (Effective July 2026)

Key Insights from the Pricing Update

• Lower-cost plans see the highest percentage increases: Business Basic, O365 E1, and Frontline SKUs are hit hardest.
• Premium enterprise plans are relatively protected: E5 increases are modest (~5%), likely to reduce churn risk.
• SMBs feel the biggest relative budget pressure: Double-digit increases on core Business plans.
• Microsoft is flattening value across tiers: More features bundled into base licenses, fewer “cheap entry” options.

Pricing Changes: Timing, Tiers, and Trade-Offs

Effective at Renewal, Not Mid-Term

If you’re mid-way through an Enterprise Agreement or subscription term, your current pricing stays in place until your next renewal after July 1, 2026. Any customer with a renewal due before that date can renew under the current pricing, locking in the rate for the duration of their term.

Business & Frontline Plans See Steeper Hikes

Lower-tier plans are seeing double-digit percentage increases. Organizations heavily using these basic tiers could face significant budget pressure post-renewal.

Enterprise Plans Increase More Modestly

Enterprise E3 and E5 suites also increase, but by smaller margins. Microsoft appears to be keeping high-end premium tiers relatively protected to avoid customer churn.

1100+ New Features Added

Microsoft is justifying these price increases by pointing to the large number of new features spanning productivity apps, security, compliance, AI (Copilot), and device management.

Core Value vs. Add-Ons

These price increases do not automatically include new premium products such as Microsoft 365 Copilot. Copilot remains a separate add-on license at extra cost.

Fine Print: For existing Enterprise Agreement customers, the new prices will take effect only upon EA renewal (or if you purchase new licenses after July 1, 2026). There is no automatic price jump for licenses mid-term.

Why Are Prices Increasing? Over 1,100 New Features and Capabilities

Microsoft is framing this price update as the natural result of significantly increased value in the Microsoft 365 service. In a December 2025 announcement, Microsoft emphasized its “commitment to helping organizations of every size protect their people and data, streamline IT operations, and confidently embrace AI transformation.”

Here are some of the major enhancement areas Microsoft has rolled out:

• AI-Powered Productivity
• Enhanced Security in Core Suites
• Integrated Device Management & IT Tools
• Continuous Innovation

This rapid pace of innovation (over 1,100 updates in a year) is unprecedented, and Microsoft argues that the cumulative value provided by a Microsoft 365 subscription has dramatically increased, warranting a higher price.

In short, Microsoft is bundling more and more functionality into the base Microsoft 365 suites (instead of selling those capabilities separately).

What This Means for Your Organization

• Budget Impact: Model the cost increase for your organization’s Microsoft 365 usage. For example, a company with 100 users on M365 E3 will see its annual licensing cost increase from approximately $43,200 to $46,800 (a $3,600 increase per year) once the new pricing takes effect, unless you leverage the promotions listed below.
• License Optimization: Now is the time to audit license usage and identify any overspending or unnecessary allocations.
• Renewal Timing and Term Strategy: Your renewal date is now more important than ever. Consider early renewal to secure existing pricing for longer.
• Training & Adoption: Since you’re paying for a lot of new functionality, make sure your organization is actually benefiting from it.

In summary, conduct a comprehensive licensing health check. Align your licensing spend with actual usage and business needs before the new prices hit. The goal is to enter July 2026 with a lean, right-sized Microsoft 365 footprint, and ideally, a plan to leverage Microsoft’s promotions to mitigate the impact.

Promotions to Offset the Price Increases

The good news is that Microsoft has rolled out several promotional offers in late 2025 and early 2026 that can help customers save on Microsoft 365 costs. These promotions are likely a response to the upcoming price hike, aiming to encourage customers to adopt new products (like Copilot) or commit to longer terms before the increases take effect.

Across SMB and enterprise environments, Microsoft promotional pricing can generate savings ranging from thousands to hundreds of thousands of dollars, especially when aligned with renewals ahead of the 2026 price increases.

Enterprise Discounts

SMB Discounts

Microsoft 365 Promotions – FAQs

1) What types of customers are these Microsoft promotions designed for?

These promotions are primarily designed for mid-market and enterprise customers, especially those looking to adopt or expand Microsoft 365 E5, security, compliance, and Copilot workloads.

2) Which Microsoft products are most heavily promoted?

The strongest focus is on:

• Microsoft 365 E5
• M365 Purview Suite
• M365 Defender Suite
• Microsoft 365 Copilot

Overall, Microsoft is prioritizing security, compliance, and AI-enabled productivity.

3) What discount levels are available?

Most promotions offer discounts of 10%–15%. One promotion stands out with a significantly higher discount (up to 50%), intended to drive adoption of a specific solution.

4) Do these promotions require long-term commitments?

Yes. Many of the most attractive offers require a 3-year commitment, particularly for:

• M365 E3 & E5
• Purview and Defender Suites

This reflects Microsoft’s strategy to encourage long-term platform standardization.

5) Are these promotions available to existing customers?

In many cases, no. Most offers are limited to new-to-offer, new-to-suite, or new-to-M365 E5 customers. Eligibility should be confirmed early.

6) Are there minimum or maximum license requirements?

Yes. Several promotions specify license quantity thresholds (minimum and maximum seat counts). These offers are typically not intended for very small deployments.

7) How does Microsoft Copilot factor into these promotions?

Copilot is a strategic attach motion. Microsoft is encouraging customers to adopt Copilot alongside security (Defender) and compliance/governance (Purview), helping address data protection and risk concerns tied to AI adoption.

8) Is an annual commitment required even if customers want monthly billing?

Yes. While some offers allow monthly billing, they still require an annual (or multi-year) contractual commitment.

9) Can these promotions be combined with other Microsoft offers?

No. Most promotions cannot be stacked with other Microsoft discounts or incentives. Partners are also required to pass through the full discount to customers.

10) How long are these promotions valid?

End dates vary by offer. Some promotions run through mid-2026, while others are shorter-term. Always verify the specific end date before positioning an offer.

11) Are any of these promotions still in preview or limited availability?

Yes. Some offers reference public preview programs, commitment tiers, or supplemental enablement materials, indicating availability or operational readiness may still be evolving.

12) What is Microsoft’s overall strategy behind these promotions?

Microsoft is using these promotions to:

• Drive adoption of higher-value SKUs
• Lock in longer-term commitments
• Position security and compliance as foundational
• Accelerate Copilot adoption with proper governance

Most of these promotions run until the end of FY2025 (June 30, 2026), aligning closely with the price increase date. The implication: Microsoft is incentivizing customers to take action before July 2026.

Important: Microsoft promotions typically cannot be stacked. Timing and strategy are crucial; coordinate your renewal or true-up to coincide with the discount that best fits your scenario.

Locking in Current Pricing

One of the most impactful steps you can take is to lock in today’s pricing before the deadline. If you can renew or extend your Microsoft 365 agreement before July 1, 2026, doing so could preserve the lower pricing for the duration of your next term.

By renewing early (or signing a longer multi-year agreement now), you delay the price increase. For example, a company that signs a 3-year renewal in Q2 2026 would continue paying the old prices until mid-2029.

Even if an early renewal isn’t feasible, locking in a longer-term commitment before the increase is worth discussing. For monthly or annual subscriptions (e.g., via CSP), moving to a 36-month term in early 2026 can provide budget certainty—though it does increase commitment.

Savings Scenarios: How Much Can You Save?

To put the promotions and early renewal strategies into perspective, here are example scenarios that illustrate potential savings.

Scenario 1 – Mid-Market Company

500 users on Microsoft 365 E3 (3-year promo eligible)

• List price (post-increase): ~$39/user/month
• Annual cost at list: 500 × $39 × 12 = $234,000/year
• Discounted annual cost (10% promo): $234,000 × 0.90 = $210,600/year
• Annual savings: ~$23,400

Scenario 2 – Enterprise

1,000 users on Microsoft 365 E5 (3-year promo eligible)

• Annual cost at list: 1,000 × $60 × 12 = $720,000/year
• Discounted annual cost (15% promo): $720,000 × 0.85 = $612,000/year
• Annual savings: $108,000
• 3-year savings: ~$324,000

Scenario 3 – Small / Lower Mid-Market Business

300 users on Microsoft 365 Business Standard

• Annual cost at list: 300 × $14 × 12 = $50,400/year
• If 15% promo applies (best case): $50,400 × 0.85 = $42,840/year
• Annual savings: ~$7,560

Scenario 4 – Upgrading from E3 to E5 with a Discount

800 users moving from E3 → E5 (upgrade promo eligible)

• Annual incremental cost (no promo): 800 × $21 × 12 = $201,600/year
• Discounted incremental cost (15% promo): $201,600 × 0.85 = ~$171,360/year
• Annual savings on upgrade: ~$30,240

Scenario 5 – Large Enterprise Multi-Year Strategy

2,000 users on Microsoft 365 E3

Option A – Do nothing (post-increase pricing)

• Annual cost: 2,000 × $39 × 12 = $936,000/year

Option B – 3-year E3 promo at 10% discount

• Annual cost: ~$842,400/year
• Annual savings vs. list: ~$93,600
• 3-year savings: ~$280,800

Executive Summary Across Scenarios

• 10–15% promos are realistic, but mostly tied to 3-year commitments.
• E5, security, and Copilot-related motions see the strongest incentives.
• Enterprise scale amplifies even modest discounts.
• SMB promos exist but are more limited and situational.

Conclusion: Prepare Now to Mitigate the Impact

Microsoft’s July 2026 pricing changes are significant, but they also present opportunities to plan ahead and mitigate the impact. Educate finance and executive stakeholders now, incorporate the new pricing into budget forecasts, and pursue licensing optimization, promotions, and renewal timing strategies.

Want help navigating these changes? Contact us for a Microsoft 365 licensing assessment. We can analyze your environment, identify optimization opportunities, and help you chart a plan to maximize savings while getting full value from Microsoft 365.