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:
In this blog, our Microsoft experts break it down clearly and, more importantly, strategically.
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:
Organizations on different billing structures (such as monthly billing) should review how their specific agreements are affected.
(Some plans remain unchanged.)
This update reflects Microsoft’s strategic direction with AI, security, and management becoming baseline expectations instead of add-ons.
Here’s what that means.
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:
AI value depends heavily on your environment configuration.
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:
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:
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:
Expanded mailbox sizes help:
For some businesses, this may be the most meaningful day-to-day benefit of the 2026 update.
The honest answer: It depends on how you’re licensed today.
If you’re:
This bundling may streamline your environment and reduce complexity.
If you’re:
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.
Even though the change takes effect in July of 2026, smart planning starts now. Here are three proactive steps:
Many organizations are over-licensed, under-licensed, or misaligned with their actual security posture.
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.
AI isn’t just a feature; it’s a governance decision. This is where configuration and oversight matter.
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.
How We Create Our Content
As a future-ready technology company, we embrace AI as an accelerator to empower our teams and enhance the way we create. We believe that the reliability of AI technology depends on the people behind it, which is why every blog is supported by AI tools and then carefully reviewed, validated, and enriched by our subject matter experts. This balance enables and empowers our team to produce content that is useful, accurate, and trustworthy for our readers.