Microsoft to Increase Prices of Commercial Office Suites in July

Microsoft announced on Thursday that it will raise subscription prices for its Office productivity suite for commercial and government customers, effective July 1.

The Office portfolio—comprising Word, Excel, PowerPoint and Outlook—has come under growing pressure from Google’s competing suite of cloud‑based productivity tools.

“We are continuously investing and innovating our platform for the future,” said Nicole Herskowitz, corporate vice president for Microsoft 365 and Copilot. “In the last year we released more than 1,100 features across Microsoft 365, Security, Copilot and SharePoint,” adding that these enhancements justify the price adjustment.

Price increases for commercial Office plans are rare. The last adjustment occurred in 2022, when Microsoft raised its productivity bundles for the first time since the debut of Office 365 in 2011. The company rebranded Office 365 as Microsoft 365 in 2020 and earlier this year announced a consumer‑focused price hike.

Microsoft’s commercial offerings range from standard Office‑only bundles to premium Microsoft 365 plans that bundle Windows updates and advanced security tools.

Effective July 1, the new list prices are:

• Microsoft 365 Business Basic – $7 per user per month (up from $6)
• Microsoft 365 Business Standard – $14 per user per month (up from $12.50)
• Microsoft 365 Business Premium – $22 per user per month (unchanged)
• Office 365 Enterprise E1 – $10 per user per month (unchanged)
• Office 365 Enterprise E3 – $26 per user per month (13% increase)
• Microsoft 365 Enterprise E3 (includes Windows) – $39 per user per month (8% increase)
• Microsoft 365 Enterprise E5 – $60 per user per month (5% increase)
• Microsoft 365 F1 (front‑line workers) – $3 per user per month (up from $2.25)
• Microsoft 365 F3 – $10 per user per month (up from $8)

U.S. Department of Defense and other government agencies will see comparable percentage hikes.

All plans continue to exclude the $30‑per‑user Microsoft 365 Copilot add‑on, which leverages generative AI. While some enterprises have begun broad deployments of Copilot, others are still evaluating its ROI.

Volume‑discount agreements, which have traditionally softened headline price movements for large customers, have been scaled back in recent quarters, tightening Microsoft’s pricing power.

From a financial perspective, the Productivity and Business Processes segment—home to Office—generated roughly 43% of Microsoft’s $77.7 billion first‑quarter revenue. In the latest quarter, commercial Microsoft 365 cloud revenue grew 17% year‑over‑year, with seat counts up 6%, driven largely by small‑ and medium‑sized businesses and front‑line workforces.

Industry analysts view the price hike as a strategic response to two converging trends. First, the competitive threat from Google Workspace is intensifying as Google adds AI‑driven features and tightens its integration with Chrome OS. Second, Microsoft is positioning its AI‑enhanced Copilot as a premium, revenue‑generating add‑on, and the higher base prices create a more favorable margin environment for upselling.

From a technology standpoint, the 1,100 new features rolled out over the past year focus on three pillars: security automation, collaborative intelligence, and low‑code integration. Features such as real‑time data insights in Excel, AI‑assisted writing in Word, and automated meeting notes in Teams not only improve user productivity but also deepen lock‑in, making it costlier for enterprises to switch platforms.

However, the price increase could prompt price‑sensitivity among cost‑conscious SMBs, especially those already evaluating alternatives like LibreOffice or open‑source cloud suites. Companies that rely heavily on volume licensing may negotiate more aggressively, potentially eroding the announced pricing uplift.

Overall, Microsoft appears to be leveraging its market dominance and AI roadmap to extract incremental revenue while maintaining a differentiated value proposition against Google. The move underscores the broader trend of enterprise software vendors monetizing AI capabilities and rebalancing pricing structures in a competitive cloud productivity market.