Microsoft 365 Price Increases 2026: How to Cut the Cost at Renewal

Prices by plan (with Teams)

Below is a list of M365 SKUs, their before and after prices, and the percentage increase:

One plan is intentionally missing from that table: Microsoft 365 E7. It bundles E5, Microsoft 365 Copilot, Microsoft Entra Suite, and Agent 365 into one $99-per-user SKU, and its price isn’t changing. It does pick up the same E5 feature additions, Security Copilot capacity, and expanded Intune, just without the list-price bump.

Prices without Teams where it hurts most

Microsoft 365 F1 without Teams jumped 43%, the largest increase in this update. Microsoft sells no-Teams versions of these suites at a discount (a split that started with EU competition rulings and now applies everywhere), and every SKU offered without Teams sees a higher percentage increase than those that include Teams. If your organization is using another application for online meetings (Zoom) your missing out on one of the benefits of M365, which is 3rd party tool rationalization.

Standalone products and government pricing

Pricing on standalone products and government SKUs also see an increase. Entra ID, EMS, Windows E3/E5, and Microsoft 365 Apps costs increased, matching the percentage increases in the suites that bundle them. If you buy any of these standalone rather than as part of a Microsoft 365 suite, check Microsoft’s standalone pricing table directly, don’t just assume the suite percentage applies. Two products are untouched: standalone Microsoft Teams and standalone Microsoft 365 Copilot licenses aren’t part of this update at all.

Government customers get a gentler version of the same increase. GCC and GCC High suites are up around 8% for most plans, effective the same July 1 date, but here’s the difference: any increase above 10% gets phased in over several years instead of landing all at once. That’s a cushion commercial customers don’t get. One more wrinkle for government buyers, U.S. Federal, State, and Local agencies on AOS-G are excluded from the EA discount removal covered below, which is quietly making AOS-G look more attractive than a standard EA for agencies weighing their renewal options.

One more charge to note, unrelated to this update: if you bill an annual subscription on a monthly basis, Microsoft has added a 5% premium since April 2026. It stacks on top of whatever plan increase applies; a monthly-billed E3 seat, pays the E3 increase plus this 5%, full stop.

Why is the increase bigger than the headline for many enterprises?

Here’s the part that matters more than the headline percentage if you’re on an Enterprise Agreement: Microsoft killed the EA volume discount, separately from the July price increase.

Previously, large EA customers got automatic price breaks. The larger the organization the larger the price discount under EA. An example is Level D (roughly 15,000+ seats) got about 12% off list, and Levels B and C got smaller but real discounts. After that date, every EA, EA Subscription, and MPSA customer defaults to Level A, the plain Microsoft.com list price, at their next renewal, no matter how many seats they run.

On-premises licensing and the US Government/Education price lists are the exceptions; they didn’t lose their discount structure.

Stack the discount loss on top of the list increase, and the real number gets uncomfortable fast. When we model EA renewals for clients coming off a Level C or D agreement, the combined effect usually lands at 15–20% above last year’s rate, not the 5–8% the E3 or E5 list price alone suggests. Run that math on a 25,000-seat Microsoft 365 E5 tenant that had Level D pricing, and you’re looking at roughly $3 million more per year (the full calculation is below under Savings Scenarios). Pull your actual Customer Price Sheet before you sign a renewal. The tables above show the list-price move, not what Microsoft will actually quote you.

This is also prompting many enterprises to reconsider the EA itself. CSP gives you per-seat flexibility and skips the true-up mechanics that make an EA expensive to carry. It won’t be the right move for everyone, but a price increase landing at the same time as a discount removal is exactly when that comparison is worth running. (We cover the EA-to-CSP tradeoffs and the questions we get asked most in a companion piece.)

What the higher price includes

Increases are a part of business, but Microsoft is not simply bumping up pricing; rather, they are including new capabilities that were previously available as add-ons. The addition that will matter most to Tenants is that E3 will get Defender for Office 365 Plan 1, plus several Intune tools as standard. E5 adds Security Copilot capacity and improved Intune management; Business plans get more Copilot Chat and an extra 50 GB of mailbox storage. (Full plan-by-plan breakdown is in our companion guide to the 2026 feature changes.)

If a newly bundled feature replaces something you already pay for separately, Defender is the common one, canceling the duplicate is the single cleanest way to claw back some of the increase.

How to lower your cost at renewal

The window to lock in the old price closed July 1. What’s left are the same cost-reduction moves that always worked; they just matter more now that the starting price is higher. None of them requires a promotion from Microsoft.

License Optimization before you renew. A license audit comes in two phases. The first phase is the elimination of ghost seats, that is, licenses assigned to former employees who are no longer with the company. At renewal, many organizations simply renew their M365 SKUs without conducting an audit. The second way to optimize M365 licenses is called Rightsizing. This method maps each user’s role to real-world M365 feature usage. Continuing to pay for an SKU after the user has changed roles, or never using the apps they were assigned in the first place, results in unnecessary spend. Pull a 90-day sign-in and usage report from the admin center, and retire or reassign anything with below-real use. Since every seat you cut is now priced at the new, higher rate, cleanup pays back more than it did last year. Our guide to licensing optimization walks through the process step by step. On an EA, this unused capacity is also the core argument for CSP’s shelfware-versus-elasticity case.

Drop add-ons that are now bundled. This point is pretty straightforward and obvious. If you are paying for the Defender for Office 365 Plan 1 as an add-on to a SKU, it will now be included in the E3 base plan, so check whether you can cancel that add-on at your next renewal, then do the same audit for every other add-on you carry. The timing catch: if you’re mid-contract on a third-party email security tool, you won’t see the savings until that contract actually lapses, so line up the two renewal dates now.

Monthly vs Annual. This is the same story across the consumer landscape: the annual rate is always cheaper than the month-to-month rate. Using M365 Business Premium as an example, you would pay $316 total for the year at the monthly rate vs. $264 for the year if paid annually. So that’s a saving s of 16% per year. Multiply that by dozens or hundreds of licenses, and it makes sense to opt for an annual recurring payment.

Promotions Renewal Strategy. Promotions are widely available and can be found by doing a simple web search, asking your favorite LLM like Copilot, or checking the Partner Center announcement board.

What the increase looks like in dollars

These are representative examples at new list prices; your actual numbers depend on your seat count, agreement, and any discounts you’re eligible for.

Mid-market: 500 seats on Microsoft 365 E3. 500 E3 seats at the new $39 rate run about $234,000 a year, $18,000 more than the old $36 rate. Here’s the good news: trimming just 5% of unused seats (25 licenses) before you renew claws back $11,700 a year, more than half the increase. That’s usually easier than people expect once they actually pull the usage report.

Enterprise: 1,000 seats on Microsoft 365 E5. The $3 price increase is easily factored into the new net. Across 1,000 E5 seats, it adds $36,000 per year, bringing the annual total to $720,000. The bigger surprise may be hiding in the EA renewal. Remember those discounts If your agreement lost its Level B, C, or D discount in November 2025, your actual increase will be higher than anything shown on Microsoft’s price sheet.

Large enterprise: 25,000 seats on Microsoft 365 E5, EA renewal. For a company with 25,000 E5 seats, losing the Level D discount hurts a lot more than Microsoft’s list-price increase. The discounted rate was about $50 per user each month. At the new $60 list price, annual spend jumps from roughly $15 million to $18 million. That’s a 20% increase, not the 5% shown on the price sheet, and most of the added cost comes from the discount disappearing.

Frontline: 5,000 seats on Microsoft 365 F1 5,000 frontline seats at the new $3 with-Teams rate add about $45,000 a year over the old $2.25. Switching to the no-Teams SKU only saves money if those workers genuinely never touch Teams, it carries its own 43% increase, the steepest in this whole update.

Microsoft 365 price increase key takeaways

• Microsoft 365 price increases range from 5% for Microsoft 365 E5, which moves from $57 to $60, to 33% for Microsoft 365 F1 with Teams, which rises from $2.25 to $3. F1 without Teams is the outlier at 43%. The tables above show the change for every SKU.
• The new prices apply to purchases made on or after July 1, 2026. Existing customers keep their current rates until their first renewal after that date.
• Some enterprise customers will see a larger increase than Microsoft’s price sheet suggests. Microsoft removed EA volume discounts for Levels B, C, and D on November 1, 2025, so EA and MPSA customers now renew at Level A pricing. Customers that previously received a Level C or D discount could see a combined increase closer to 15% or 20%, rather than the published 5% to 8%.
• GCC and GCC High customers face smaller increases of about 8% for most plans, beginning July 1. Any increase above 10% will be phased in over several years. AOS-G agencies are also exempt from the separate EA discount removal.
• A license audit is usually the quickest way to lower costs because it identifies unused or oversized licenses. Companies should also review add-ons now included with their plans, such as Defender on E3, and check whether monthly billing on an annual term adds another 5%. Current promotions may offer additional savings.
• CSP is worth considering for companies that previously depended on Level C or D EA discounts. It allows more flexible seat purchasing and makes license reductions easier, but it will not be the cheaper option in every case. Contract length and Azure purchasing can change the calculation. The EA-to-CSP FAQ covers those differences in more detail.
• Standalone Microsoft Teams and Microsoft 365 Copilot licenses are excluded from the 2026 price increases.

Model it before you renew

The July 1 deadline has passed, so there’s no more beating the clock. What’s left is showing up to your renewal with your license data actually cleaned up, unused seats cut, and redundant add-ons canceled before you negotiate. For EA customers specifically, don’t skip the discount-removal math; it’s usually the bigger number.

Want us to run these numbers against your actual tenant? Request a Microsoft 365 licensing review, and we’ll model your renewal based on your real seat count and usage.