Your Microsoft 365 costs are going up. On July 1, 2026, Microsoft raises prices across nearly every commercial suite and standalone component. The increases range from 5% to over 40%, depending on what you license.
This isn't a minor adjustment. For a mid-market organization with hundreds of seats, the new pricing can add tens of thousands of dollars to your annual technology spend. If you renew after July 1 without a plan, you'll absorb the full increase at your next contract date.
The good news: you have time to act. Below is what's changing, what it costs, and how to protect your budget before the deadline.
What's Changing in the 2026 Microsoft 365 Update
Microsoft announced two changes on December 4, 2025. They take effect together but serve different purposes.
Pricing updates take effect July 1, 2026. They apply to new and renewing customers globally.
Packaging updates begin rolling out in June 2026. Microsoft is adding security and management features to most suites. These roll out at no extra charge and finish by August 1, 2026.
The price increase covers Office 365, Microsoft 365 Enterprise, Business, Frontline and Government suites, plus standalone products like Windows, Enterprise Mobility and Security, and Entra.
Two things are not affected: standalone Microsoft Teams and Copilot SKUs. Their pricing stays the same for now.
How Much More Will You Pay
The increase depends on your specific plan. Here are the commercial price changes for the most common suites, effective July 1, 2026, in USD per user per month.
Enterprise suites (with Teams):
- Office 365 E3: 13% increase, from $23.00 to $26.00
- Office 365 E5: 8% increase, from $38.00 to $41.00
- Microsoft 365 E3: 8% increase, from $36.00 to $39.00
- Microsoft 365 E5: 5% increase, from $57.00 to $60.00
Business suites (with Teams):
- Business Basic: 16% increase, from $6.00 to $7.00
- Business Standard: 12% increase, from $12.50 to $14.00
- Business Premium: no change, $22.00
Frontline suites (with Teams):
- Microsoft 365 F1: 33% increase, from $2.25 to $3.00
- Microsoft 365 F3: 25% increase, from $8.00 to $10.00
Standalone components rise too. Windows Enterprise per device jumps 31%, from $5.85 to $7.63. Apps for Business climbs 21%, from $8.25 to $10.00.
Run the math on your seat count. A 13% increase on 500 Office 365 E3 licenses adds about $18,000 a year. That number belongs in your budget planning now, not in a surprise invoice later.
When the New Pricing Hits Your Business
Timing is the lever you control.
Existing customers keep current pricing until renewal. If your renewal falls before July 1, 2026, you can renew or upgrade and lock in today's rates until your next renewal after that date.
If your renewal falls after July 1, you'll move to the new pricing at that date.
Microsoft will give at least 30 days notice in the Message Center before packaging changes reach your tenant. The new pricing applies to both annual and monthly billing plans.
The takeaway is simple. Your renewal date determines your exposure. Know it. Plan around it.
What You Get for the Higher Price
Microsoft is adding features to justify the increase. Several strengthen security and IT management, two areas that drive real business risk.
By August 1, 2026, these capabilities roll out across qualifying suites:
- Microsoft Defender for Office 365 Plan 1. Added to Office 365 E3 and Microsoft 365 E3. It protects against phishing, malware and malicious links across email and collaboration tools.
- Intune Remote Help. Lets IT teams resolve device issues faster through secure remote sessions.
- Intune Advanced Analytics. Surfaces device and performance issues before they cause business disruption.
- Intune Plan 2. Expands device management across your environment.
- Intune Endpoint Privilege Management. Reduces risk by controlling administrative access on devices. Included with Microsoft 365 E5.
- Microsoft Cloud PKI. Simplifies certificate management. Included with Microsoft 365 E5.
- Intune Enterprise Application Management. Streamlines how apps are deployed and secured. Included with Microsoft 365 E5.
Smaller suites get additions too. Business Basic, Business Standard and Business Premium each gain 50GB of email storage and URL time-of-click protection against malicious websites.
These features carry value. Defender for Office 365 Plan 1 alone closes a common gap in email security. The question for leadership is whether you're set up to use what you're now paying for.
What This Means for Nonprofits and Government
The increase reaches beyond standard commercial accounts.
Nonprofits are tied to commercial rates through a fixed discount. Their prices rise in line with commercial pricing. The nonprofit discount stays between 60% and 75% on impacted products, but the underlying increase still applies.
Government customers face matching increases across GCC, GCC High and DoD environments. For Government suites with total increases above 10%, federal regulations require the increase to phase in over multiple years. Government feature rollouts follow compliance timelines, so they arrive later than commercial equivalents.
If you operate in a regulated or mission-driven sector, these changes affect your budget and your compliance posture at the same time. That combination deserves attention before renewal.
Why "Wait and See" Costs You Money
Many organizations will do nothing until the renewal invoice arrives. That's the most expensive option.
Three gaps show up when leadership skips planning:
- Budget surprise. The increase hits without warning, and finance scrambles to absorb it.
- Wasted spend. New security features ship into your tenant, but no one configures or adopts them. You pay more and get no added protection.
- Missed timing. Renewals that could have locked in current pricing pass by unused.
The increase isn't the real problem. The lack of a plan is. You can't control Microsoft's pricing. You can control your renewal strategy, your license mix and how well you use what you're paying for.
How to Prepare Before July 1, 2026
Take these steps now.
- Confirm your renewal date. This sets your deadline and your options.
- Inventory your licenses. Know exactly what you own and what each seat costs.
- Right-size your mix. Identify over-licensed or unused seats before you renew at higher rates.
- Plan to use the new features. Defender and Intune additions only reduce risk if they're configured and adopted.
- Model the budget impact. Put the real number in front of finance early.
Done well, this update becomes a chance to tighten your environment, not just a cost to absorb.
Turn a Price Increase Into a Smarter IT Decision
The July 2026 increase is locked in. How it affects your business is not.
The organizations that come out ahead will treat this as a planning event. They'll confirm their timing, clean up their licensing and put the new security features to work. The rest will pay more for the same outcome.
At Entech, we help mid-market organizations across construction, manufacturing and other sectors manage Microsoft 365 with cost, risk and performance in view. We'll review your licensing, map your renewal strategy and make sure you get value from every feature you're paying for.
Schedule an IT strategy session with Entech to build your Microsoft 365 plan before the July 1 deadline.