Software Price Increases Hit 16.4% as Microsoft 365 Hikes Land

Software renewals keep getting more expensive

General inflation has cooled in much of the world, but software prices have kept rising, and the increases in 2026 look larger than in 2025. Vertice tracks realised prices on a large pool of enterprise contracts. It reports that SaaS inflation hit 16.4% in June 2026, its highest monthly reading so far, after 12.1% in April and 14.2% in May.14 The firm says the 4.3-point rise over those two months is the fastest it has measured, and the June figure beats the previous record of 14.7% set in November 2025.14 Vertice puts the June rate at almost four times a US CPI of 4.2%.14

The market-wide forecasts show the same thing. Gartner's April 2026 revision put worldwide software spending growth at 15.1% this year, to about $1.44 trillion.17 SaaStr, analysing Gartner's figures, estimates that about 9 points of that growth is price increases on software companies already use. That would leave only about 6 points of genuinely new spending, most of it going to AI.1217 Zylo makes a similar point from the buyer side. It says spend rose nearly 8% in a year even though the number of applications stayed roughly flat, because vendors are charging for AI features, reshaping tiers and adding usage charges on top of subscriptions.18

The picture is consistent. Customers are not buying much more software. They are paying more for the software they already have.

Microsoft's July 2026 increase leads the list

Microsoft's commercial Microsoft 365 increase is the largest single example. Microsoft's licensing FAQ confirms that the new prices took effect on July 1, 2026, for new and renewing customers worldwide. Customers on existing multi-year agreements keep their current prices until their next renewal after that date.1 Consumer and education pricing is not part of the change.1

The increases are steepest on the cheapest plans. Business Basic went from $6.00 to $7.00 per user per month, Business Standard from $12.50 to $14.00, and Office 365 E3 from $23 to $26.2 Microsoft 365 E3 rose 8% to $39 and E5 rose about 5% to $60.2 The frontline plans used for shift and retail workers rose the most: F1 with Teams went up 33% and F1 without Teams 43%.5 Business Premium and Office 365 E1 kept their current prices, and standalone Teams and Microsoft 365 Copilot licences are not part of the change.25

Reporting on the exact figures has not always matched. When the change was announced in December 2025, Redmond Channel Partner reported a Microsoft 365 E3 price of $42 and an E5 price of $65, which are well above the $39 and $60 figures in later breakdowns.102 The later numbers appear in Microsoft's published pricing table and in several partner breakdowns, so they are the ones buyers should use.83

Microsoft says the increase pays for more value, pointing to new security, management and AI features added to the suites.16 One analysis says Microsoft cites more than 1,100 features added since 2022. It notes that whether customers get value from them depends on whether they already pay for similar tools elsewhere.9

The July list price is also not the whole cost. In November 2025, Microsoft removed Enterprise Agreement volume discounts that had been worth up to 12% to large customers.22 One estimate for a 25,000-user E5 tenant puts the combined effect of the lost discount and the new list price at about $3 million more a year. That is closer to a 20% increase than the 5.3% headline figure for E5.9 Microsoft is also adding a 5% charge from October 1, 2026, on annual-term Cloud Solution Provider subscriptions billed monthly, covering products such as SQL Server and Windows Server.21 Large customers are being hit by list increases, lost discounts and new surcharges at the same time.

The same pattern across other vendors

Microsoft is far from alone. One licensing analysis lists Google Workspace increases in January 2025, including Business Plus going from $18 to $22.22 It also lists Salesforce raising Sales Cloud Enterprise from about $165 to $175 in August 2025, Adobe's Creative Cloud Pro restructuring at about $69.99 a month, and portfolio-wide increases at IBM.22 VendorBenchmark puts weighted average increases at about 9.3% for Salesforce and 11.2% for ServiceNow. It describes ServiceNow renewals as rising 10% to 15% for heavy users, driven partly by the Now Assist AI add-on and by how hard the platform is to leave.25

Broadcom's handling of VMware remains the most extreme case, although estimates differ widely. One tracker puts increases at 150% to 1,200% after the move from perpetual licences to subscriptions and a higher minimum core count.22 VendorBenchmark puts the typical range for former perpetual-licence customers at 200% to 600%.25 Either way, it shows what can happen when a vendor with few rivals changes its licensing model.

Price trackers also report large increases among smaller collaboration and productivity tools. They are often achieved by merging plans, retiring old tiers or shrinking free plans rather than raising list prices directly.2123 These trackers mix vendor announcements with their own estimates, and some of their per-product figures disagree. They are best treated as evidence of a direction rather than exact numbers.

AI is the main justification

Across the coverage, AI is the main reason vendors give for higher prices. Gartner's own data, as SaaStr describes it, shows generative AI in what Gartner calls the "trough of disillusionment" even as AI features become standard, and more expensive, in software companies already own.12 SaaStr openly advises vendors to tie 12% to 20% increases to AI features while buyers still accept that reasoning. It expects that window to close within 18 to 24 months, once AI is simply expected at the base price.12 Advice like that suggests many 2026 increases owe as much to timing as to the cost of delivering AI.

The way customers pay is also changing. Zylo cites High Alpha data showing that 42% of companies charge for AI features through usage-based or hybrid models. It also cites Gartner's forecast that 70% of leading SaaS vendors will offer consumption-based pricing for at least part of their range by 2027.18 BetterCloud reports that even as AI token prices fell about 80% year over year, total spending grew 320%, a sign of how hard usage-based bills are to predict.16 Looking further ahead, Gartner estimates that up to $234 billion of enterprise application spending could move from per-seat subscriptions to consumption and outcome-based pricing by 2030, about 20% of the market.20

The coverage also offers a counterpoint. Zylo notes that full AI-based pricing is still the exception. Among companies with AI features, 26% do not charge for them at all and another 33% are still testing how to do so.18 Much of the AI-related price pressure customers face now is likely still to come.

How big is the increase, really?

The estimates vary widely, depending on who is measuring and how. Cledara puts the average SaaS increase at 8.7% in 2026. It reports enterprise tools rising faster and commodity categories staying roughly flat, with increases of 2% to 5%.27 VendorBenchmark's weighted enterprise average is 8.4%.25 Vertice's figures are in the mid-teens.14 PricePulse claims a 34% two-year cost increase for a typical $84,000 mid-market software stack, which it attributes mostly to forced AI tier upgrades.23

These figures measure different things. List-price averages cover the prices on a vendor's rate card. Contract-based measures like Vertice's also capture lost discounts, plan migrations and cuts to what each tier includes. The higher numbers are closer to what finance teams actually pay, because the increases that cost the most usually do not show up on the rate card. Vertice itself warns that "shrinkflation", where vendors raise prices and cut features at the same tier, may be adding to the effect.14

What buyers can do

The practical advice from the coverage is consistent. Renewal dates matter: Microsoft customers who renewed before July 1 locked in the old prices for their full new term.2 Removing unused licences matters too. Zylo's 2026 figures, as reported by one market summary, suggest about 36% of SaaS licences go unused.19 Analysts also warn that budgets indexed to CPI no longer work when software inflation runs at several times consumer inflation.13

Vendors will keep pushing increases as long as customers find their software hard to replace and AI remains a believable justification. Customers who keep accurate licence records and negotiate well before renewal will be in the strongest position to hold costs down.