Microsoft has announced a global price adjustment for Microsoft 365 and Office 365 commercial subscriptions, effective July 1, 2026. This update impacts Frontline (F-series) and Enterprise (E-series) plans and comes alongside another major licensing change: the removal of tier-level pricing for contract renewals. This means organizations will no longer benefit from volume-based discounts and could face an increase of up to 12%, making it even more critical to review licensing strategies before the deadline.
The price increase reflects Microsoft’s continued investment in AI-powered productivity tools, advanced security features, and modern management capabilities. All designed to deliver greater value in today’s digital workplace.
What is changing?
The price increase differentiates per licensing plan. See the new monthly per-user prices in the table below.
| Plan | Current Price | New Price (July 2026) | % Increase |
| Microsoft 365 F1 | $2.25 | $3.00 | +33% |
| Microsoft 365 F3 | $8.00 | $10.00 | +25% |
| Microsoft 365 E3 | $36.00 | $39.00 | +8.3% |
| Microsoft 365 E5 | $57.00 | $60.00 | +5.3% |
| Office 365 E1 | $10.00 | $10.00 | 0 % |
| Office 365 E3 | $23.00 | $26.00 | +13% |
| Office 365 E5 | $38.00 | $40.00 | +5.3% |
Why the Increase?
Microsoft’s upcoming price adjustments aren’t just about higher costs, they’re tied to significant feature enhancements that redefine the value of Microsoft 365. Over the past few years, Microsoft has invested heavily in AI-driven productivity, advanced security, and modern management tools, ensuring organizations have the capabilities needed for a secure and efficient digital workplace.
- AI productivity enhancements
- Copilot integrated into Word, Excel, PowerPoint, Outlook, and OneNote
- Agent Mode for iterative document and presentation creation
- Security upgrades
- Defender for Office Plan 1 email protection added to E3 suites
- URL checks for malicious sites in E1 and Business SKUs
- Security Copilot embedded in Defender, Intune, Entra, and Purview for E5 customers
- Management tools
- Intune Remote Help, Advanced Analytics, and Intune Plan 2 for E3/E5
- Endpoint Privilege Management and Cloud PKI for E5
What is the impact on organizations
As Microsoft prepares to implement its July 2026 price adjustments organizations across all sectors will feel the impact. These changes go beyond simple cost increases they introduce structural shifts in licensing, which will reshape how businesses budget for IT. Understanding these implications is critical for planning ahead and avoiding unexpected financial strain.
- Frontline workers: F1 and F3 plans see the steepest increases (up to 33%). Organizations with large frontline staff should review budgets and consider early renewals.
- Enterprise customers: E3 and E5 increases are modest but will affect overall IT spend, especially for organizations leveraging advanced security and compliance features.
- Removal of tier-level pricing (effective since November 1st 2025): Volume discounts will disappear, meaning every seat will cost the same regardless of quantity. This change will significantly impact large enterprises and public sector organizations.
How to Prepare
Organizations should take a strategic approach reviewing their current licenses, locking in favourable rates, and aligning features with business needs. Preparing now will help you optimize costs while leveraging the latest AI and security innovations.
- Audit current licensing: Identify which features your organization uses assess the requirement and calculate the impact.
- Consider multi-year agreements: Lock in current pricing before July 2026.
- Evaluate feature usage: Ensure you’re leveraging new AI and security capabilities to justify the cost.
- Plan for Copilot add-on: Full Copilot experience remains an extra $30 per user/month.
Conclusion
The July 2026 price increase and the recent removal of tier-level pricing represent more than just a cost adjustment. They signal a strategic shift toward an AI-first productivity ecosystem. While these changes may challenge budgets, they also unlock significant value through advanced features like Copilot, enhanced security layers, and modern management tools.
Organizations that act now will be better positioned to manage costs, maximize ROI, and fully leverage Microsoft’s innovations. Start by auditing your current licensing, evaluating feature usage, and considering multi-year agreements to lock in today’s rates.
Don’t wait until July 2026, prepare your licensing strategy today to maximize your benefit.
