Software Subscription Math Changes as 2026 Price Hikes Land

The case for renting software is weaker in 2026

In early 2024, ZDNET's Ed Bott argued that people who call software subscriptions a scam are really objecting to the price, not to the model itself. He supported the claim with simple break-even math.21 Since then, vendors have raised list prices across the industry and moved AI features into core bundles. Adobe now earns almost all of its revenue from recurring fees. Those changes don't overturn Bott's argument, but they move its weak points. The question used to be whether subscriptions could be fair. In 2026 it is who gets to decide what "fair" means, and the answer is mostly the vendors.

The idea behind the original argument still holds. Bott said that selling perpetual licenses gives a developer a burst of revenue at each release and then a long stretch of falling income while the next version is built. Recurring payments, he argued, are what keep a software business going instead of turning it into a hobby.21 His main example was Adobe Acrobat. At the time, the perpetual license for Acrobat Pro 2020 cost $538.80, and the Creative Cloud version cost $19.95 a month. The two reach the same total after roughly 39 months, and the monthly plan is easier for a small business to budget.21 He also counted practical benefits: no product keys, device management through a dashboard, and the right to install on several machines. Microsoft 365 Family, for instance, can be signed in on up to five devices at once.21

The consumer math, rerun

Newer comparisons support Bott's framework but often reach the opposite result. A five-year comparison published by MakeUseOf in September 2026 found that Office Home 2024 costs $179.99 once, while Microsoft 365 Personal lists at $99.99 a year. That puts the subscription ahead on cost after only about 1.8 years, and the five-year gap comes to roughly $320.27 For that extra money the subscriber gets 1TB of OneDrive storage, multi-device use, ongoing updates and Copilot access. The author points out that these extras are worth nothing to someone who uses one laptop and doesn't need cloud storage.27

The results vary sharply by product. Photoshop no longer has a perpetual option, so five years on the standalone plan costs $1,379.40 and nothing is owned at the end.27 Apple's Creator Studio bundle costs $645 over five years, which is cheaper than buying all six apps separately. Someone who only needs Final Cut Pro would pay more than twice the app's one-time price of $299.99.27

The Office numbers also show how much the ground has moved since Bott wrote. One pricing analysis describes Microsoft's consumer subscription rising about 43%, from roughly $70 to about $100 a year, after Copilot features were bundled in. Google's comparable suite rose about 17%.9 Bott's 39-month break-even assumed a stable price. When the monthly fee rises 43%, the break-even point arrives much sooner.

This supports a point Bott made himself: the real complaint is price.21 Our reading is that he was right about the diagnosis, and that the treatment has gotten worse. Under a perpetual license, the buyer decided whether a new version was worth paying for. Under a subscription, the vendor sets the price each year and the customer can only accept it or leave.

Enterprise customers face steeper and more complicated increases

The pressure is more concrete on the business side. Microsoft announced on December 4, 2025, that new commercial pricing would take effect July 1, 2026. Red River calls it the company's largest commercial pricing update since 2022.10 Office 365 E3 rose from $23 to $26 per user per month, Microsoft 365 E3 from $36 to $39, and Microsoft 365 E5 from $57 to $60.17 Small-business plans rose too: Business Basic went from $6 to $7 and Business Standard from $12.50 to $14. Business Premium stayed at $22.37 Frontline workers saw the largest percentage increases. F1 rose 33%, from $2.25 to $3, and the F1 version without Teams rose about 43%.610

Coverage of this round of increases differs mainly on how big it really is. CDW describes most core business and enterprise increases as falling between 5% and 16%.4 Entech gives a wider range of 5% to more than 40%.3 SAMexpert says the headline figures understate the change, because a typical mix of E3, E5 and frontline licenses produces a blended increase of 11% to 18% on the Microsoft 365 stack alone.6 Red River goes further. It notes that Microsoft dropped Enterprise Agreement volume discounts in November 2025, and that combining that with the list-price increase pushes some large organizations' effective increase toward 20%. It cites a SAMexpert estimate of about $3 million in added annual cost for a 25,000-seat E5 customer.10 We find the larger figures more credible for big buyers. Published list percentages leave out the discounts that customers have quietly lost.

Microsoft says the increase pays for more features, including Defender for Office 365 Plan 1 in E3 and metered Security Copilot in E5.10 For customers who already paid for those tools separately, the bundle may cost less overall. For everyone else, it is a higher bill for capabilities they didn't ask for.10 The same pattern shows up beyond Microsoft. Vendors are attaching AI to base products and raising the price for every user, not only for those who want the AI features.9

The industry-wide trend

Microsoft is not unusual. VendorBenchmark puts the weighted average enterprise software price increase at 8.4% for the 12 months ending in Q1 2026, with a very wide spread around that figure.2 It reports that Salesforce raised prices by a weighted 9.3% and now charges $50 to $75 per user per month for AI add-ons on Sales Cloud. Workday's HCM prices rose about 7.5%.2 AI platform add-ons rose 18% to 24% as vendors moved quickly to make money from them.2 Other analysts report renewal clauses that add 7% or more at each term, along with HubSpot moving customers into higher capacity tiers when usage crosses set limits.9

The clearest warning about Bott's optimism comes from VMware. In January 2024, Bott cited VMware's decision to end perpetual licensing as evidence that enterprise software was following consumer software into subscriptions.21 VendorBenchmark now reports that some VMware customers saw effective increases of 200% to 600% after Broadcom moved them from perpetual licenses to subscriptions and removed lower-priced bundles.2 Some of those customers have since moved workloads to alternatives such as Nutanix and OpenShift.2 That case shows a real risk of the subscription model. Once the perpetual option is gone, a new owner can reprice the entire installed base at the next renewal.

What the earnings show

Adobe's results show why vendors prefer this model. In fiscal Q3 2026, which ended August 28, Adobe reported record revenue of $6.76 billion, up 13%. Subscription revenue was $6.58 billion, or about 97% of the total.1214 Total annualized recurring revenue reached $27.50 billion, up 11.2% year over year.12 Revenue beat consensus, and the company raised its full-year guidance.18 Adobe now expects fiscal 2026 revenue of $26.576 billion to $26.626 billion.19 It also announced that Anil Chakravarthy will take over as CEO on December 1, 2026.18

The earnings also contain a detail that complicates the story. Q3 net income rose only 3%, to $1.83 billion, because operating expenses and cost of revenue grew faster than sales.12 Subscription cost of revenue rose from $510 million to $633 million year over year.19 Our interpretation is that delivering AI-heavy cloud services costs real money, which supports Bott's point that ongoing development needs ongoing revenue.21 It also suggests that customers' price increases are paying partly for AI investment many of them didn't ask for. Adobe reports that its AI-first ARR grew more than 150% year over year.16

The main argument for vendors is predictability. A large base of contracted revenue lets Adobe plan buybacks at scale. It reported about $27 billion still available under its repurchase authorizations after Q2.20 Recurring revenue gives vendors that kind of stability, and it comes from customers who have fewer and fewer ways to stop paying.

How buyers are adjusting

Customers aren't simply accepting the increases. Procurement advisers recommend checking renewal dates, because existing Microsoft customers keep their current prices until their first renewal after July 1. A subscription renewed in June 2026 holds the old rate until mid-2027.76 VendorBenchmark says Salesforce customers who negotiated using benchmark data cut their post-increase prices by an average of 22%. Those who didn't absorbed most of the increase.2 On the consumer side, a guide to subscription costs points to perpetual options that still exist, such as Affinity and standalone Office 2024. It also cites survey data showing that people underestimate their monthly subscription spending by more than half.25 Some small-business owners have gone further and argue that cheaper development tools make it practical to build their own software instead of renting many partly overlapping tools.28

Our reading

Bott's 2024 argument is still correct in principle. Software that keeps changing needs revenue that keeps coming in, and for many products a subscription buys real value: sync, storage, security updates and use across devices.2127 The underlying deal, though, now favors vendors more than it did. Price increases arrive at renewal, AI is bundled whether customers want it or not, and perpetual licenses are shrinking. The VMware case shows how far a vendor can push. Whether a subscription is worth it now depends less on the product than on whether the buyer audits usage, times renewals and negotiates. Customers who do that can still come out ahead. Customers who don't are paying for most of the steady recurring growth that vendors report each quarter.