Microsoft Increases M365 Pricing Again! What Customers Need to Know

Microsoft customers, it’s time to start preparing for yet another huge pricing change. Microsoft announced a significant round of M365 and O365 price increases set to take effect July 1, 2026. CIOs, CFOs, and procurement teams need to start preparing now because this is going to impact almost all Microsoft customers.

On top of the changes from November 2025 where Microsoft eliminated price levels with automatic volume discounts, there will be a massive effect on organizations’ budgets heading into the new year. When combining these increases and the November change, customers could see list pricing increase as much as 56% at their next renewal, making it more critical than ever to planning ahead.

Here is what Microsoft customers need to know to prepare for future renewals.

What Are The Price Increases?

Below are the expected price increases across M365 and O365:

These increases will impact all customers, from small businesses to large enterprises, though companies with large frontline worker footprints will be the most exposed. No matter what your current M365 licensing mix is, these changes will have significant impacts to budgets at renewal time. Below is a quick example showing how much this could impact your organization’s budget if you don’t plan well in advance of your renewal:

Why Is Microsoft Increasing Their Pricing?

Microsoft is focusing on how many features they added to M365 over the past three years to justify this price increase. There is truth to this, as Microsoft has released over a thousand new features this year. But is this truly the only reason for the price increase, or does Microsoft have other motivations here?

This new price increase, combined with Microsoft’s removal of price levels in November, gives Microsoft substantial pricing power at renewals now. They have effectively made discounting completely discretionary. This gives Microsoft far more control over deal economics.

Even if your organization plans on negotiating a flat renewal with the same products and same user count, Microsoft can still apply significant price increases, at times higher than 20%.

What Should Customers Expect?

Clients who are not all in on Microsoft’s key products can expect to see commercial incentives tied to their renewals reduced. Microsoft will likely reserve the most favorable commercial concessions for customers who commit to products like E5, Copilot, or Azure growth.

Microsoft constantly focuses on ARPU (Average Revenue Per User) on earnings calls. Expect them to push customers to adopt higher cost products like E5 and Copilot in order to increase ARPU at their next earnings.

What Can Customers Do?

With enough time and the right planning, Microsoft customers can still secure competitive pricing:

1. Conduct a Full License Utilization Review

During negotiations, Microsoft will state that these price increases are a result of the features they have added to the suite. Customers need to know if they are even utilizing these new features. Understanding your current M365 utilization is critical, so your business can engage Microsoft in value-based conversations.

Understanding your current and expected utilization allows you to combat the tactical approach Microsoft is going to try to take. In addition, evaluating your utilization helps businesses determine whether or not they are on the optimal M365 suite and if any current 3^rd party products can be replaced with features you may already have through M365.

2. Get Executive-Level Conversations Started

Your CIO or senior IT leader should immediately engage Microsoft executive sponsors. Make it clear this change impacts your future investment decisions. It doesn’t matter how far out the renewal is, it is important to voice your concern and set expectations as soon as possible. Even if you did this following the November announcement, re-engage with Microsoft to reset expectations.

3. Use Competition

The M365 suite is not just a productivity platform. It includes Security, Compliance, Phone, and Analytics features to name a few. If you can even compete out a subset of the M365 suite, this can significantly improve your leverage at negotiations.

The Bottom Line

These new price increases, combined with the removal of price levels, create a materially different commercial environment for enterprise customers. Microsoft now has greater pricing power and stronger leverage to align discounts with strategic product adoption. Organizations that prepare early, reassess license value, and negotiate with a structured, data driven approach will be best positioned to manage the cost impact and retain control over their long-term Microsoft strategy.

Stay Ahead of M365 Price Changes. Don’t let unexpected cost increases catch you off guard. Explore our Microsoft Advisory Services and find the best path forward for your organization.