You might want to start setting aside a little extra budgetbecause Microsoft is raising the price tag on its popular Office productivity software for businesses and government clients.
The tech giant announced on Thursday that subscription costs for many of its commercial Microsoft 365 and Office 365 packages will increase starting July 12026. This is only the second time the company has raised prices for the business-focused suite since Office 365 launched in 2011. And the move comes as Microsoft aggressively pushes into artificial intelligence.
Microsoft says the new rates reflect years of investmentparticularly in AI tools and cyber protection. The company stressed how much work has gone into improving the platformnoting that “In the last yearwe released more than 1,100 features across Microsoft 365SecurityCopilotand SharePoint.”
Microsoft argues that these upgrades not only strengthen security but also help modern workplaces cope with rising threatsheavier IT demandsand faster adoption of AI. The additions include enhanced email protectionnew endpoint management toolsCopilot Chat integrationsand built-in Security Copilot agents for teams already using Microsoft DefenderPurviewEntraand Intune.
How much will customers pay?
According to the pricing table Microsoft publishedseveral popular tiers will become more expensive from mid-2026. Business Basic will go from $6 to $7while Business Standard will move from $12.50 to $14. For essential staffthe Microsoft 365 F1 plan jumps from $2.25 to $3a surge of over 33%. The F3 plan will also increase from $8 to $10.
Enterprise customers will also pay more: Office 365 E3 will climb from $23 to $26. Meanwhilethe comprehensive enterprise bundles that include Windows and security features will also see increases: Microsoft 365 E3 goes from $36 to $39and the fully-featured Microsoft 365 E5 moves from $57 to $60. Some tierssuch as Business Premium and Office 365 E1remain unchanged.
Competition and pressure in the productivity market
Microsoft’s move arrives at a time when Google continues to push hard with its Workspace toolsespecially among cost-sensitive organizations. Even soMicrosoft highlighted its reachpointing out that more than 430 million people use Microsoft 365 apps and that over 90% of Fortune 500 companies rely on Microsoft 365 Copilot.
Beyond competitionMicrosoft’s own earnings show just how central Office remains to its business. CNBC reported that almost 43% of Microsoft’s $77.7 billion fiscal first-quarter revenue came from its Productivity and Business Processes segment. That number includes Microsoft 365 cloud serviceswhich saw revenue growth of 17% and a 6% increase in paid seats.
Microsoft says it is giving customers a long runway to adaptsaying in the announcement that it is “sharing these updates now to give customers ample time to plan.”
In other Microsoft news: Microsoft is rolling out new Teams features aimed at more immersivemetaverse- meetings.