Microsoft drops M365 Copilot price for SMBs, upgrades free Copilot Chat

Microsoft will reduce the price of Microsoft 365 Copilot for small and mid-sized firms beginning next month.

As of Dec. 1, 2025, Microsoft 365 Copilot for Business will cost $21 per user, per month for customers with any Microsoft 365 Business plan. That’s down from the current $30 price per month set when the tool debuted in 2023.

The new Microsoft 365 Copilot Business subscription will be available to organizations with 300 or fewer employees and includes the same features as before. This means access to the AI assistant in apps such as Excel, Teams, and Outlook, as well as Copilot agents and tools such as Notebooks. 

“We heard from smaller companies that they wanted a version that would fit their needs and budgets, too,” a Microsoft spokesperson said in a blog post Tuesday. “So we’re making that happen.”

The announcement came during the company’s annual Microsoft Ignite conference this week in San Francisco.

Existing M365 Copilot customers that qualify for the new M365 Copilot Business should contact Microsoft as they will not be automatically transferred to the lower price.

Despite strong interest among IT leaders in M365 Copilot, uptake remains at an early stage. Most customers are still in pilot projects or have deployed the tool to a small subset of employees as they grapple with challenges around data governance, user adoption, and uncertain value. The lower price could ease some of those concerns for small and mid-size businesses (SMBs).

“It’s a smart move by Microsoft to price Copilot aggressively at $21 for SMBs, primarily because their smaller budgets mean it softens the ROI measurement headache,” said Mike Leone, practice director, Data, Analytics & AI, at Omdia.

“While big enterprises justified the $30 investment by sinking resources into projects just to prove its value (or frankly, just paid and hoped for the best), the math simplifies dramatically for an SMB.”

Businesses that deploy M365 Copilot often struggle to quantify productivity gains, he said, making it hard to calculate a clear return on investment.

“Like anything, it’s hard to justify paying a premium (though priced competitively) when you can’t prove who’s using it or how much time users are actually saving,” he said. “By lowering the financial hurdle so significantly, SMBs can immediately see the tangible value of regained time and efficiency that validates the purchase.”

Business will still need to carefully consider where to allocate M365 Copilot Business licenses, however. SMBs operate on razor-thin margins, he said, and $21 per user is still a significant additional monthly cost. “The question isn’t just, ‘Is it cheaper?’ but ‘Does my bookkeeper or my warehouse manager need this tool?’ I think Microsoft would do well in providing clearer guidance on which roles within an SMB would benefit most,” said Leone.

“So, the price drop is a fantastic opener, but I don’t think it eliminates the need to scrutinize that total monthly overhead before rolling it out company wide.”

The introduction of M365 Copilot Business expands the range of options for accessing Microsoft’s AI assistant. Alongside the two main M365 Copilot subscriptions, businesses can subscribe to Teams Premium ($10 per user/month), which includes “intelligent recap” and other collaboration-focused AI features such as automated notetaking and live translation.

Then there’s Copilot Chat, available at no extra cost to Microsoft 365 customers.  Essentially a lite version of M365 Copilot, it features a chat interface (grounded in web data rather than a customer’s own files), limited management controls, and pay as you go access to agents. 

In September, Microsoft announced that Copilot Chat will be available inside Office apps such as Word, Excel and PowerPoint. This will let users to ask the AI assistant for help drafting documents or analyzing spreadsheets, for instance.  

At Ignite, Microsoft also announced an enhancement to the Copilot Chat integration with Outlook that will be “content-aware” across an entire Outlook inbox, calendar, and meetings, not just individual email threads. It is slated to be available in preview in March 2026. 

Agent Mode in Word, Excel, and PowerPoint agents — announced for paid M365 Copilot users in September — will enable content creation directly from the Copilot Chat interface. The AI assistant asks clarifying questions before producing a draft that users can direct it to iterate on or jump to the app to work on it themselves.

Agent Mode in Copilot Chat will also be available in “early 2026.”

More Microsoft Ignite 2025 news:

• Microsoft Fabric IQ adds ‘semantic intelligence’ layer to Fabric
• Microsoft unveils Agent 365 to help IT manage AI ‘agent sprawl’
• Microsoft touts scalability of its new PostgreSQL-compatible managed database
• Microsoft unveils Agent 365 to help IT manage AI ‘agent sprawl’
• Microsoft bets on agentic AI for cloud ops, but analysts doubt the pitch