In my last post about the July 2026 price increases, I said it would be the first price increase on core M365 products in over four years. I’ve gotten some pushback on that—from readers, customers, internal customer account teams, and from others who’ve watched their bills climb without adding a single license.
Here’s the thing: technically, I’m right. Practically, for your budget? You’re right, it’s a price increase.
What Microsoft Calls a “List Price”
When Microsoft quotes you a price, they’re quoting the annual term, paid yearly price. That’s the official list price. On their website, M365 E3 shows “$36.00 user/month, paid yearly”—which means $432 per user per year, paid upfront. That number hasn’t changed since March 2022.
(image from Microsoft.com)
The monthly figure you see is just the annual price divided by twelve for easy comparison. It’s not misleading, but it’s easy to miss what “paid yearly” actually means.
What Changed on April 1, 2025
Before April 1, 2025, you could buy an annual term subscription and choose how to pay: all upfront, or spread across 12 monthly payments. Same price either way. Think of it as “12 months same as cash.”
That ended on April 1st.
Now, if you choose annual term with monthly payments, Microsoft adds a 5% premium. You’re still committed for the full year, but you’ll pay more for the flexibility of spreading it out.
I spoke with a Microsoft rep at Ignite 2024 about this change. Their framing? Microsoft is “giving everyone a micro-loan.” I’ll admit, that felt a little insulting at first. But financially, it’s accurate—you’re paying interest on deferred payments. I just prefer thinking of it as losing the “12 months same as cash” option.
The Pricing Tiers Now
So here’s where things stand for subscriptions:
- Pay upfront (annually): List price. No premium.
- Pay monthly over 12 months: List price + 5% premium.
- Monthly term (no annual commitment): List price + 20% premium.
(There are 3-year subscriptions also but I don’t focus on those since very few customers and few CSPs even consider those. Maybe this will be another post.)
That 20% monthly term premium has been around for a while. The 5% is new as of April 2025, and it’s what’s catching people off guard.
That M365 E3 subscription last year was $36 per month. With the renewal, or a new purchase, now it is $37.80 per month.
What You Can Do
If your organization can shift to annual upfront payments, you avoid the 5% entirely. Several of our customers have made that switch. For others, cash flow makes monthly payments necessary, and the 5% is an acceptable cost for that flexibility. Neither answer is wrong—it depends on your situation.
Looking Ahead
July 1, 2026 brings actual list price increases on core products—the first since March 2022. M365 E3 goes from $36 to $39. That’s a different conversation, and I covered it in my previous post.
But if you’ve been wondering why your renewal cost more than expected this past year, now you know: it’s not a price increase per Microsoft’s definition. It’s a price premium for how you’re choosing to pay. Your budget doesn’t care about the distinction, but understanding it helps you make better decisions at renewal time.
Until next time.
Matthew