Microsoft 365 Price Increase: A Reminder of What's Coming on 1 July

Microsoft announced the 2026 Microsoft 365 price increase in December. Five months on, it has slipped down most of the renewal agendas I see, eclipsed by Copilot conversations, Azure commit negotiations, and the ongoing migration from Enterprise Agreement (EA) to Microsoft Customer Agreement for Enterprise (MCA-E). With less than seven weeks until the new pricing takes effect, it seems a useful moment to bring it back to the top of the page.

The increase lands on 1 July 2026 for new purchases and renewals. Existing customers hold their current pricing until their renewal date, which is precisely why the renewal date itself now matters more than it used to. In my recent article, Game of Thrones, Microsoft Edition: Direct, Channel, and the Battle for Your Renewal, I argued that the renewal has become a multi-channel exercise rather than a single negotiation. The 1 July date is the deadline that gives that argument its urgency.

Below is a reminder of the published numbers, my read on what they really mean, and the practical steps I would recommend to clients whose renewals fall in the second half of 2026 or in 2027.

Microsoft frames this as a per-SKU adjustment — 8.33% on E3. Layer in Azure, Copilot and consolidation pressure, and the renewal often lands at 20-25% over the prior period. That blended number, not the per-SKU figure, is what reaches the CFO.

The numbers, as Microsoft published them

Suites With Teams

Suites Without Teams

Standalone components are also moving, including Entra ID, Enterprise Mobility + Security (EMS), Windows E3/E5, and Microsoft 365 Apps. Microsoft has published the full standalone pricing table. Standalone Microsoft Teams and Copilot stock-keeping units (SKUs) are not included in this update. Pricing for existing customers is preserved through to their next renewal anniversary.

How I read the increases

Looking at the pricing curve, two things stand out.

First, the largest percentage increases are concentrated in the Frontline (F1, F3) and small and mid-size business (SMB) suites. These are the SKUs where customers were most exposed to under-licensing, placing too much of the workforce on the cheapest possible suite. Microsoft has effectively narrowed the cost gap between Frontline and Information Worker SKUs, which makes the case for moving people up the stack less attractive, not more.

Second, the smallest percentage increases sit on Microsoft 365 E5. The pattern is consistent with where Microsoft is steering its install base toward security-inclusive, AI-ready, consolidated suites. E5 is the destination SKU, and the pricing is being managed accordingly.

Microsoft 365 Business Premium holding flat at $22.00 is worth a moment's attention. It is the SKU Microsoft sells against Office 365 E3 in the sub-300-seat segment. Holding it unchanged while Office 365 E3 rises 13% is a channel decision, not a customer concession. For organisations in that segment, the relative economics of Business Premium have improved meaningfully, which is, I assume, the intended effect.

What the increases actually mean at renewal

A few observations from the renewals I have been working on this quarter.

The headline percentages are misleading on their own. The blended uplift depends on your actual licence mix. A customer running predominantly Microsoft 365 E3 with some E5 and a Frontline tail tends to land in the 11-18% range on the Microsoft 365 stack alone. Layer in Azure consumption growth, any Copilot expansion, and consolidation pressure Microsoft may be applying to your EA, and the renewal often presents to the chief financial officer (CFO) at something closer to 20-25% over the prior period. That is the number the conversation needs to be built around, not the 8.33% on E3 alone.

The renewal date matters more now than at any point I can remember. Two reasons. First, the Cloud Solution Provider (CSP) promotions that Microsoft extended into 2026 (the multi-year Microsoft 365 E3/E5 discounts, the Copilot bundle pricing, the Windows 365 offer) close on 30 June 2026. Customers renewing after that date lose access to those locks. Second, customers with renewal dates before 1 July 2026 have an opportunity to extend or restructure at current list, which is a meaningful saving over a multi-year term.

The CSP arbitrage has widened. With direct EA pricing flattening (as I covered in the Game of Thrones article), and CSP partners retaining genuine margin flexibility, the spread between a well-negotiated CSP proposal and a poorly-negotiated EA renewal is the largest I have seen it. The widened spread does not mean CSP is automatically the right answer (it rarely is in pure form for larger estates), but it does mean the comparison has to be run, properly, before signing anything.

What I would do now

For clients with renewals in the next twelve months:

Run an allocation review before the negotiation begins. The 33% Frontline increase is only painful if your Frontline allocation is correct. In most estates I review, it is not. Information workers sitting on F3 by accident; F1 users who could legitimately be on a deskless plan; E5 over-deployment in functions that do not consume the security features. The cleanest discount in any renewal is the licence you do not buy.

Model your blended number, then bring it to the table. Microsoft's deal desk will work to a percentage discount off the new list. Your job is to know what that percentage means in absolute terms against your actual mix. Without that number, you are negotiating in their currency.

Benchmark your proposal. I include this in every engagement note, but it bears repeating in this context. With programmatic discounts compressed, the only way to know whether the proposal in front of you is competitive is to compare it against peer data: recent transactions of similar shape, similar geography, similar commit profile. CSP quotes serve a related function. Even if you have no intention of moving channel, a credible CSP proposal is the most effective lever available to test direct pricing.

Negotiate protection from future price increases into the contract. Microsoft's price increases used to be infrequent enough that customers did not contract around them. That is no longer a safe assumption. Where possible, secure price protection clauses on core SKUs for the term, particularly for any Copilot or AI commitments where the pricing trajectory is least settled. A renewal signed at the new list with no forward protection is a renewal that will hurt again at the next anniversary.

Decide your channel position before Microsoft does. The choice of direct, CSP, or a hybrid is not one to make in the final weeks of a renewal. It is the frame for the entire negotiation. Make the decision early, build the proposal accordingly, and let Microsoft compete against the position you have already established.

Closing thought

Microsoft did not present this as a 20%+ renewal hit. It was framed, reasonably enough from their perspective, as a per-SKU adjustment reflecting investment in AI, security, and management capabilities. The arithmetic of how those per-SKU adjustments land on an actual customer's actual bill is a different conversation, and one that has to happen on the customer side of the table, not Microsoft's.

The customers I have seen handle this best are the ones who started the modelling work in Q4 of last year. They are negotiating from data. The customers who are starting now still have time, but the runway is shorter than it looks, and the period between now and 1 July is when the leverage is at its highest.

If your renewal is in the second half of 2026 or beyond, the planning work matters more than the negotiating work. Get the allocation right, model the blend honestly, and decide the channel question early.

If you need help modelling the impact of the July 2026 price increases on your specific environment or want support with EA renewal negotiations, get in touch. SAMexpert does not sell Microsoft licences or cloud services. Our advice is independent.