Microsoft 365 Pricing Update 2026: What’s Changing, What’s Included, and What It Means for Your Business

Microsoft has announced a Microsoft 365 pricing and packaging update that will take effect July 1, 2026.  Microsoft published full details in its Advancing Microsoft 365: New capabilities and pricing update blog post, outlining the motivation and scope of the changes. 

If you’ve already seen headlines about price increases and AI bundling, you might be wondering:

• Are we about to pay more?
• Is Copilot now included?
• What security features are being bundled?
• Do we need to change anything before renewal?

In this blog, our Microsoft experts break it down clearly and, more importantly, strategically.

What’s Changing on July 1, 2026?

Microsoft is updating both pricing and feature packaging across several Microsoft 365 plans.

Some plans will see modest price increases. Others will remain the same. But the bigger story is bundling. Microsoft is folding more AI, security, and device management capabilities directly into core plans.

Note that Microsoft’s published  MSRP pricing examples are based on annual commitments billed annually.

That means:

• These prices apply to annual term subscriptions
• They take effect for new purchases and renewals on or after July 1, 2026

Organizations on different billing structures (such as monthly billing) should review how their specific agreements are affected.

 U.S. MSRP Examples

• Business Basic: $6 → $7
• Business Standard: $12.50 → $14
• Office 365 E3: $23 → $26
• Microsoft 365 E3: $36 → $39
• Microsoft 365 E5: $57 → $60

(Some plans remain unchanged.)

 What’s Included in the 2026 Update 

This update reflects Microsoft’s strategic direction with AI, security, and management becoming baseline expectations instead of add-ons.

Here’s what that means.

1. Expanded AI Capabilities

Microsoft continues to integrate AI-powered capabilities into the Microsoft 365 experience.  While premium Copilot licenses remain add-ons, more foundational AI functionality is becoming embedded within the platform.  This reflects Microsoft’s broader strategy: AI is becoming a baseline expectation instead of a premium novelty.

Organizations evaluating Copilot should consider:

• Data access controls
• Governance readiness
• Identity and security alignment

AI value depends heavily on your environment configuration.

2.  Security Enhancements

Microsoft is enhancing security features within certain base-level and mid-tier subscriptions.  However, it’s important to understand the context; these changes are largely designed to bring lower-tier plans more in line with higher-tier services.

For example:

• URL time-of-click protection in Microsoft Defender is being added to certain mid-tier plans like Business Standard and E3.

This narrows the capability gap between lower-tier and enterprise subscriptions.

If you’re already on Business Premium or Microsoft 365 E5, you will not see significant new security enhancements as part of this update because those plans already include advanced protections.

3. Enhanced Device & Identity Management

Expanded Intune and Entra-related management capabilities are being folded into certain plans, improving:

• Endpoint visibility
• Policy enforcement
• Conditional access controls
• Governance consistency

This reflects Microsoft’s focus on secure-by-default environments.

4.  Mailbox Size Increases

While pricing adjustments receive the most attention, one of the most tangible improvements may be mailbox storage increases across Business Suite subscriptions.  For many organizations, especially those in regulated industries:

• Mailbox limits create administrative overhead
• Archiving becomes unnecessarily complex
• Storage constraints create user friction

Expanded mailbox sizes help:

• Reduce workarounds
• Improve user experience
• Support long-term retention needs
• Lower storage-related support tickets

For some businesses, this may be the most meaningful day-to-day benefit of the 2026 update.

Price Increase or a Value Increase?

The honest answer: It depends on how you’re licensed today.

If you’re:

• Already buying security add-ons
• Exploring Copilot
• Running a compliance-heavy environment (finance, healthcare, biotech)
• Managing hybrid or remote teams

This bundling may streamline your environment and reduce complexity.

If you’re:

• Lightly licensed
• Not using advanced security tools
• Underutilizing your current Microsoft investment

Then yes, you may feel a pricing impact without immediately seeing the added value. However, you will be gaining new security benefits that you should take advantage of. That’s why license strategy is so important.

What Businesses Should Do Now

Even though the change takes effect in July of 2026, smart planning starts now.  Here are three proactive steps:

1. Review Your Current License Mix

Many organizations are over-licensed, under-licensed, or misaligned with their actual security posture.

2. Evaluate Security Gaps

Now that more tools are bundled in, are they properly configured? Simply having Defender or Intune doesn’t mean they’re optimized for security or ease of use.

3. Understand What Copilot Really Means for You

AI isn’t just a feature; it’s a governance decision.  This is where configuration and oversight matter.

Navigate the 2026 Microsoft 365 Changes with a Recognized Microsoft Support Leader

Microsoft’s 2026 pricing update reflects a broader shift toward AI-driven productivity and secure-by-default environments.

Successfully navigating that shift requires deep technical expertise and proven support capabilities.

In 2026, iuvo earned Microsoft’s new Support Services Designation, an honor awarded to only 30–40 partners worldwide at launch.

This designation recognizes partners with demonstrated excellence in delivering advanced, engineer-led technical support for Microsoft environments, backed by strong customer satisfaction and proven operational maturity.

What that means for you:  As Microsoft continues to evolve its platform, having the right partner matters.

If you’d like a strategic review of your Microsoft 365 environment ahead of the changes coming in July of 2026, our team is here to help. Contact our experts today.

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