Microsoft's Twin Squeeze: Raising M365 Prices by 43% While Shedding 5,000 Workers
Published on 07/04/2026 at 21:14 | Redaktion boerse-global.de
The Redmond software giant is pulling two levers at once. Since July 1, Microsoft 365 business customers have faced some of the steepest price increases in the suite's history, while internally the company prepares to cut roughly 5,000 jobs. The dual strategy underscores a relentless push to monetise its AI investments at the same time as it streamlines costs.
The new pricing hits frontline workers the hardest. For the standard Enterprise E5 tier, the increase is a relatively modest 5%, while E3 climbs 13%. Service-worker Frontline tariffs, however, are jumping by between 25% and 43%. Only Business Premium and Office 365 E1 have been spared. Behind the headline rises, Microsoft is also scrapping parallel volume discounts from many existing contracts, pushing the effective cost increase for large enterprises closer to 20%. To soften the blow, the company is bundling extra security features — including Defender basic protection and new Intune applications — with a rollout deadline of August 1, 2026.
At the same time, thousands of employees face an uncertain future. Reports indicate Microsoft will eliminate up to 2.5% of its global workforce, equivalent to around 5,000 roles, with cuts concentrated in sales, consulting and the Xbox division. The announcement could come as early as next week, though the timing is not final. The July start of Microsoft’s fiscal year has become a familiar pattern for reductions; this year’s round is expected to be smaller than last year’s, partly thanks to a voluntary early-retirement programme for US staff at grade 67 or below.
The gaming unit remains under particular pressure. Xbox chief Asha Sharma has warned staff that the business “cannot continue this way” and is pushing for a complete reset, including possible cuts to marketing and budgets. Rising hardware-component costs and falling revenue have eroded margins: Microsoft has poured more than $20 billion into content, platform and hardware subsidies over five years, yet gaming revenue slumped 7% to $5.3 billion in the quarter through March. Hardware sales collapsed 33%, and content and services fell 5%. Microsoft declined to comment on the layoff reports.
Should investors sell immediately? Or is it worth buying Microsoft?
Parallel to the job cuts, Copilot is being redesigned. From August, the consumer and enterprise versions will merge, and low-usage features such as Copilot Podcasts and Labs will be dropped. Head of Copilot Jacob Andreou is overseeing the shift, which focuses on tools that demonstrably improve productivity. Paid add-ons — including AI coding tools and “AutoPilot” agents for routine tasks — are being rolled out. The paying user base has already swelled from 15 million in January to 20 million in April, underlining Copilot’s growing importance to Microsoft’s long-term revenue plans.
The company is also investing heavily in AI delivery. The newly formed Frontier Company unit, backed by $2.5 billion in investment and staffed with around 6,000 engineers, industry experts and salespeople, will develop and optimise AI systems directly at enterprise clients. It marks a further escalation in Microsoft’s efforts to embed its technology deep inside customer operations.
At the stock level, the shares closed Friday at €342.00, a 4.3% weekly gain that partly recovers from a bruising run. Over 30 days, however, the stock is still down 7.15%, year-to-date losses stand at 15.26%, and the 12-month decline is 19.36%. The 52-week high of €478.10, set on 28 October 2025, is nearly 29% above the current price, while the 52-week low of €307.10 was touched as recently as 25 June 2026. The shares trade marginally below the 50-day moving average of €350.37 and well below the 200-day line of €381.48. An RSI reading of 51.5 signals neutral territory, but annualised volatility of 40.59% suggests further turbulence ahead.
Microsoft at a turning point? This analysis reveals what investors need to know now.
The question now is whether customers will swallow the price hikes without a meaningful drop in renewals. Upcoming reports on contract extensions will provide the first real test of Microsoft’s pricing power. If demand holds, the costly AI build-out — from Copilot to Frontier Company — can be justified. A sharp pullback in subscriptions, on the other hand, would put even more pressure on a stock already trading at a deep discount to its recent highs.
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