Microsoft (MSFT +1.60%) made a big announcement recently, saying its top-tier Microsoft 365 E7 enterprise plan would have a monthly price of $99 and include its Copilot AI. That may not seem like a big deal at first glance, considering that nearly every tech company has its own AI agents for a monthly subscription. But the price increase that begins May 1 is 65% higher than Microsoft's previous monthly cost for its top enterprise subscription.
The price hike marks the company's focus on generating more revenue from AI to help offset the $72 billion the company spent in capital expenditures over the past two quarters, mostly for AI data center infrastructure.
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There's a lot at stake for Microsoft
Building out AI data centers is a necessity for large tech companies, and Microsoft's sizable investment will eventually need to recoup some of those costs. And raising prices for its most capable enterprise AI suite is the most logical place to start.
Microsoft currently has just 15 million paying Copilot accounts, which is a drop in the bucket compared to the 450 million Microsoft 365 commercial customers. Not all of those customers are potential upgrade material, like small businesses that aren't on enterprise plans. But the gap still indicates that Microsoft has a lot of potential to find many more high-paying AI customers from that pool.
One key feature it's integrating into the new Microsoft 365 E7 plan is Copilot Cowork, which uses Anthropic's Claude Cowork to perform multi-step tasks for users. Microsoft's software is still synonymous with workplace productivity, and by offering more AI tools -- including managing AI agents -- the company hopes to expand its AI subscriber base and increase artificial intelligence revenue.
The agentic AI race is highly competitive, and Microsoft is feeling the pressure. ChatGPT has more than 50 million paying subscribers, and OpenAI estimates it could reach 220 million by 2030. Microsoft is likely looking at ChatGPT's growth and realizing that now is the time to get its enterprise users subscribed to its AI services before more of them shift their AI needs entirely to OpenAI and other artificial intelligence services.
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What Microsoft shareholders should look for
The big unknown for Microsoft, and many software companies, is whether they can integrate AI tools into their existing systems that are good enough to keep users from switching over to ChatGPT, Gemini, or Claude to handle certain tasks.
Microsoft has faced disruption many times before and come out ahead, so I wouldn't bet against the company just yet. But investors should keep a close eye on the company's Microsoft 365 commercial products and cloud service segment to see if its new move is paying off.
Sales from this segment rose by a strong 17% in the second quarter, but commercial seats only increased by 6%. Investors will need to see accelerating growth from both sales and more paying subscribers to feel confident that Microsoft's latest AI strategy is working.
