Prime Highlights:
- Microsoft will stop automatically applying discounts for clients buying large quantities of Microsoft 365 and other cloud products, potentially raising prices by 10% or more.
- Analysts say the impact of the pricing update is already reflected in Microsoft’s guidance, and the company maintains strong investor confidence.
Key Facts:
- Most of Microsoft’s $128.5 billion operating profit in fiscal 2025 came from the Productivity and Business Processes unit, with around 73% of revenue from commercial products and cloud services.
- The pricing update takes effect on November 1 for new and renewed agreements, aiming to provide more transparent and consistent pricing for customers and partners.
Key Background:
Microsoft is set to stop automatically applying discounts to clients purchasing large volumes of Microsoft 365 productivity software and other cloud products, a move that could increase prices by 10% or more for some customers. The change, which takes effect on November 1 for new and renewed agreements, reflects Microsoft’s ongoing push for transparent and consistent pricing across its services.
The adjustment was announced on August 12, shortly after Microsoft reported strong fiscal fourth-quarter earnings and issued guidance projecting double-digit year-over-year revenue growth for the new fiscal year. Analysts at UBS said it’s safe to assume that the impact of the pricing change was already factored into the company’s guidance, and they maintain a buy rating on the stock.
The company also emphasized that the move would enable clearer, informed decision-making for both customers and partners.
Industry estimates suggest price hikes for some clients could range between 6% and 12%, while others see an impact as low as 3% or as high as 14%, depending on the organization’s size and purchasing level. Microsoft is aiming to increase revenue per commercial seat by selling Copilot add-ons and moving some users to higher-tier plans.
Most of Microsoft’s $128.5 billion operating profit in fiscal 2025 came from its Productivity and Business Processes unit, which includes Microsoft 365. About 73% of the unit’s revenue comes from commercial products and cloud services. Some customers may be willing to pay more to keep using Microsoft apps, while others might cut back on spending in other areas, like Azure cloud services.
Experts also note that companies might still find lower prices by purchasing through cloud resellers rather than directly from Microsoft, though industry adoption of the new pricing structure will take time.
Focusing more on the company in question, Microsoft’s stocks have increased by 20 percent in 2019 compared to the 10 percent improvement of the Nasdaq, circumventing that potential problem and demonstrating the market optimism towards the growth strategy of the corporation, along with the change of pricing policies
