Microsoft 365 price increase brings AI capabilities but hits businesses with up to 33% hike

Microsoft 365 ups prices in 2026 for extra AI and security

Microsoft 365 customers have gotten an early Christmas present from Santa Satya: price rises. All that AI goodness isn't going to pay for itself. The increases, which will affect the company's commercial, frontline worker, and government customers, take effect from July 1, 2026, and range from a slight bump to an eye-watering hike. According to Microsoft, the rises (or "updates" in Micro-speak) are driven by expanded security, management, and AI capabilities. Microsoft said, "Organizations face an increasingly complex threat landscape, rising IT demands, and the urgent need for AI-powered transformation. "To help our customers meet these challenges head-on, we're enhancing our Microsoft 365 offerings with additional security and management capabilities empowered by AI." And also increasing the prices. Not all prices are rising. Business Premium will, for example, remain $22. However, Business Standard will go from $12.50 to $14, and Business Basic will increase from $6 to $7 per month. Other increases are substantial. The cost of the Microsoft 365 versions aimed at frontline workers, F1 and F3, will rise sharply. Microsoft 365 F1 will go from $2.25 per month to $3, an increase of around a third. F3 is set to go up from $8 to $10. The last increases came in 2022, and, according to Microsoft, were the first significant increase in a decade. The company has clearly got a taste for price hikes and so will turn the screws a little tighter on its customers in 2026 rather than wait for another ten years. After all, the company said in its announcement, "In the last year, we released more than 1,100 features across Microsoft 365, Security, Copilot, and SharePoint." So it's only fair that it should charge a little (or a lot) extra for all the new features. Earlier this year, Microsoft warned customers that price rises were on the way for personal and family subscriptions due to all the extra Copilot functionality now available. Customers could opt to skip the feature (assuming they could find the option) to bring the prices back down. In its announcement, Microsoft said that the changes would apply globally. In addition, the company said "nonprofit pricing will be adjusted in line with commercial pricing." This is due to the fixed percentage discount applied for nonprofit pricing. Government pricing is also increasing, although any increases over 10 percent will be phased in over multiple years. Microsoft included a helpful table summarizing new capabilities coming to Microsoft 365 suites in 2026, including Copilot Chat enhancements and additional security, management, and analytics features.®

Prepare Your Business for Higher Microsoft Software Prices

It's often noted that in business and in life, there is no such thing as a free lunch. The same is true when it comes to software upgrades, which is why most business owners will see the prices they pay for Microsoft 356 and Microsoft Office suits in 2026 rise for the first time in four years. The tech giant's announcement this month that it will hike fees for its Microsoft 365 productivity programs means most business owners will pay anywhere from 5 percent to 33 percent more for them starting in July. That comes after the company boosted prices earlier this year for its consumer software bundle that includes Word, Excel, PowerPoint, Outlook and OneNote applications from $69.99 to $99.99 per year. There are several reasons behind the price jolts, including years of continued improvements that weren't reflected in its pricing. The company made over 1,100 of those free enhancements last year alone, according to a Microsoft blog post on the pricing changes. But another likely factor for the increase is a desire to offset Microsoft's monumental investments in artificial intelligence (AI) development. That has not only forced the company to spend billions in the race to create new AI products for businesses and consumers. It's also competing with rivals like Google, Meta, and Amazon in building data centers and even power plants to support the power-guzzling tech tools. The good news for Microsoft 356 and Office users is some of those AI products will be integrated or enhanced as part of the pricing increase. The bad news is business owners will see their outlays for Microsoft 365 Business Basic jump 16.7 percent to $7 per user per month, and the cost of Business Standard rise by 12 percent to $14. Mercifully, Business Premium packages will remain unchanged at $22. Enterprise bundles will inch up as well, with Microsoft 365 E3 pricing increasing from $23 to $26 per month. The Microsoft 365 E3 offer that includes Windows for businesses will rise from $36 to $39 per month, while Microsoft 365 E5 will jump from $57 to $60. While business owners who use the entry-level Office 365 E1 suite will benefit from its price remaining at the current $10 monthly level, companies with front line workers won't have things nearly as good. Subscriptions for the Microsoft 365 F1 and F3 that cashiers and similar employees use will surge from $2.25 to $3 and F3, and from $8 to $10 respectively. Those considerable hikes in percentage terms are already fueling complaints on social media that the increases represent price gouging by a highly profitable company. According to CNBC, 43 percent of "Microsoft's $77.7 billion in fiscal first-quarter revenue came from its Productivity and Businesses Processes segment." Still, Microsoft's July hikes were a very long time in coming The company hadn't increased the price of its enterprise suites since 2022, and had left its consumer offer alone since 2013, despite the myriad free upgrades. Moreover, Microsoft said in a blog post about the price increases that it will expand and enhance programs using its Copilot AI tool -- though new business users will still need to pay $30 for the add-on for that. Similarly, the company said it's rolling out a Security Copilot agentic app for customers using Microsoft Defender, Entra, Intune, and Purview, Entra to strengthen and automate responses to online threats. "The latest AI and security capabilities in Microsoft 365 demonstrate Microsoft's sustained commitment to helping organizations stay ahead of the latest innovations and evolving threats," said Microsoft vice president and practice lead Dion Hinchcliffe in the blog post. So, while no business owner likes to see their costs rise, they can't really accuse Microsoft of inflationary pricing that's been rampant across the economy in recent years. Plus, with their new, upgraded software paid for, some entrepreneurs may get help from its AI tools finding a way to get lots of better deals -- and maybe ever a free lunch. The final deadline for the 2026 Inc. Regionals Awards is Friday, December 12, at 11:59 p.m. PT. Apply now.

AI-Powered Microsoft 365 Is Smarter And Pricier - Microsoft (NASDAQ:MSFT)

Microsoft Corp (NASDAQ:MSFT) is rolling out major upgrades to Microsoft 365 and preparing broad price hikes for 2026 as it doubles down on helping organizations navigate an artificial intelligence-driven workplace. Today, hundreds of millions of people use Microsoft 365 apps, and most major companies already rely on its AI assistant, Copilot. Because workplaces are facing more security threats, heavier technology demands, and growing pressure to adopt AI responsibly, Microsoft is expanding the capabilities of Microsoft 365 in 2026. Also Read: Nvidia Rallies As Microsoft Expands AI Infrastructure In Middle East With US Backing At the same time, the company will introduce new pricing, similar to tariff adjustments, for commercial and government customers starting July 1, 2026. Microsoft says it is announcing these changes well in advance so organizations can plan ahead. New Intelligent Features Across Microsoft 365 Apps To make Microsoft 365 more useful in an AI-driven workplace, the company is adding more intelligent features across Word, Excel, PowerPoint, Outlook, and OneNote. The company is also giving IT teams stronger tools to manage how employees use AI, ensuring workplaces can adopt new technology confidently and safely. Microsoft is widening its security protections as well. On the IT side, Microsoft is adding features that will help tech teams diagnose device issues quickly, prevent problems before they happen, and manage apps more easily. Higher-end plans, such as Microsoft 365 E5, will also receive tools that control who can access sensitive information and keep AI use within safe boundaries. 2026 Price Increases Across Plans Alongside these upgrades, Microsoft will raise prices for its commercial and government subscriptions. The company says these increases reflect the scale of its recent investments, including more than 1,100 new features released across Microsoft 365, Security, Copilot, and SharePoint in the past year. Under the new pricing, Microsoft 365 Business Basic will increase from $6 to $7 per person per month, and Business Standard from $12.50 to $14. Business Premium remains at $22. The entry-level Office 365 E1 stays at $10, while Office 365 E3 will rise from $23 to $26. Microsoft 365 E3 will increase from $36 to $39, and Microsoft 365 E5 will move from $57 to $60. Prices for frontline worker plans are also going up: Microsoft 365 F1 rises from $2.25 to $3, and Microsoft 365 F3 increases from $8 to $10. Government organizations, including the U.S. Defense Department, will face similar percentage increases. Microsoft Responds To Reports On AI Sales Targets Also this week, Microsoft pushed back against reports claiming it lowered sales growth targets for certain AI products. The company told Reuters that the Information misrepresented how its sales quotas work and stressed that it has not cut overall AI quotas, helping the stock recover from early losses. Microsoft shares had slipped on Wednesday after reports said it reduced sales targets for some AI software because customers remain cautious about adopting the tools. Azure sales staff reportedly viewed the changes as unusual. Meanwhile, Microsoft is investigating a bug that has prevented customers from downloading Microsoft 365 desktop apps from the homepage since November 2. The company traced the problem to a service update that disrupted license checks and is testing a fix before rolling it out. A separate update is also in progress for issues affecting Excel attachments in the new Outlook client and other Microsoft 365 installation problems. The $3.6 trillion Big Tech giant gained over 14% year-to-date, lagging the NASDAQ Composite Index's 22% returns. MSFT Price Action: Microsoft shares were up 0.14% at $481.50 during premarket trading on Thursday, according to Benzinga Pro data. Read Next: Microsoft Doubles Down On AI Independence With $10 Billion Portugal Data Center Photo by HJBC via Shutterstock MSFTMicrosoft Corp$481.420.12%OverviewMarket News and Data brought to you by Benzinga APIs