Microsoft 365 Pricing Changes in 2026: A Decision Point for Enterprise IT
Microsoft has confirmed pricing and capability updates to Microsoft 365 (M365) that take effect on July 1, 2026. Several Business, Enterprise, and Frontline licenses will see cost increases. At the same time, Microsoft is tying more security, identity, endpoint control, and AI governance into the upper tiers.
This is not a routine price adjustment. It is a forcing event for how IT leaders manage cost, security, and Copilot exposure across the tenant.
Most teams believe they are prepared. Many are not.
M365 2026 Pricing Changes at a Glance
The impacted SKUs include Business Basic, Business Standard, Office 365 (O365) E3, M365 E3, M365 E5, and M365 F1 and F3. Business Premium and O365 E1 remain flat for now.
Here is what is publicly announced so far:
- Business Basic increases from $6 to $7.
- Business Standard increases from $12.50 to $14.
- O365 E3 increases from $23 to $26.
- M365 E3 increases from $36 to $39.
- M365 E5 increases from $57 to $60.
- M365 F1 increases from $2.25 to $3.
- M365 F3 increases from $8 to $10.
For a 2,000-user environment, even small per-user increases can add six figures in new annual spending. That impact grows fast when licensing misalignment is already present.
Why This Matters to Operations
These changes are not limited to the Mail, Teams, and Office apps. Microsoft is tying value to the following:
- Security enforcement
- Identity governance
- Endpoint control
- AI usage auditing and oversight
If Copilot is part of your road map, these controls move from optional to required. Without proper identity, device, and data access rules in place, Copilot becomes a risk multiplier rather than a productivity gain.
The pricing shift is Microsoft’s signal that secure, governed environments now carry a higher base cost.
The Question Most IT Teams Avoid
Are we actually using what we already pay for today?
In most licensing reviews, we find the following:
- E5 security features licensed but not enforced
- Intune licensed while endpoints remain managed elsewhere
- Premium users performing basic workloads only
- Frontline users assigned plans that exceed their device needs
- Overlapping tools covering the same security functions
When prices increase, these gaps transition from representing inefficiencies to posing financial and security risks.
The Real Risk Is Not the Price
The real risk is misalignment.
Many organizations respond to price increases by cutting licenses or postponing security work. While this may provide short-term budget relief, it can lead to long-term operational risks. A more effective approach is to reassess licenses based on actual job functions, device usage, and control requirements.
It’s common to find engineers licensed at E5 for features they never use, while frontline teams lack the necessary device controls. Addressing this mismatch can often offset the impact of the price increase.
Licensing should reflect how users operate today, rather than how the system was structured years ago.
What High-Performing IT Teams Are Doing Now
The strongest IT organizations are not waiting for 2026. They are already acting in five core areas:
- Auditing M365 license usage by role, not department
- Mapping E3 versus E5 versus Business Premium based on control needs
- Reviewing Intune, Defender, and identity policy coverage
- Comparing E3 plus add-ons to the full E5 cost
- Locking in terms where contract protection still applies
These efforts establish a system for managing costs proactively, ensuring that financial oversight is in place before any price adjustments are mandated during renewal periods.
Where Most Cost Optimization Efforts Fail
Most M365 cost optimization initiatives focus on reducing the number of licenses, often neglecting the underlying issues that drive overall expenses. This narrow perspective can prevent organizations from fully realizing potential savings and operational efficiencies.
Proper optimization comes from aligning the following:
- User role and access level
- Device posture and compliance
- Identity enforcement
- Data exposure risk
- AI readiness
Licensing is the result of those decisions, not the starting point.
The Decision in Front of You
You must recognize the 2026 M365 pricing changes not merely as a cost issue but as a crucial opportunity to correct existing misalignments. Choosing to view them as a financial burden will only lead to higher expenses without addressing the real problems. Instead, take the proactive route to regain control and align your spending effectively.
Your Next Step
Alchemy Technology Group, LLC (“Alchemy”), helps enterprise IT leaders regain control of M365 spending and security through license optimization based on real feature use; Intune, Defender, and identity enforcement that reduces risk; Copilot readiness without exposing internal data; and a contract strategy that protects long-term budgets.
To support this, Alchemy offers a strategic Microsoft Licensing Strategy Mastermind workshop, a focused one-on-one working session with Microsoft licensing experts that delivers clear answers on underused licenses, inactive security features, Copilot behavior in your current control model, and cost and risk misalignment. This is not a product pitch. It is a tenant-level audit tied to real users, real controls, and real exposure. For organizations unsure how the Microsoft Customer Agreement for Enterprise (MCA-E), Cloud Solution Provider (CSP), or true-up changes affect them, this is the cleanest next step before renewal pressure sets in.
Author
Kyle Timm