Microsoft could increase the Office 365 pricing by $5B Analyst estimates for its business

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An upcoming price increase for Microsoft 365 business software subscriptions, announced this week, promises to boost its business by as much as $5 billion annually, one analyst predicts.

Microsoft will increase the cost of its subscriptions for business software, which includes its core Office 365 suite. This is expected to take effect on March 1, 2022. The company calls it “the first substantive pricing update” since it launched Office 365 back in 2011, shifting from traditional licenses to subscription pricing.

The price increase “was a smart strategic poker move that could be another $5 billion+ incremental tailwind for Redmond in 2022, giving more confidence that numbers could continue to move up higher looking ahead,” wrote Daniel Ives, an analyst with Wedbush, in a note to clients Friday morning.

For context, Microsoft’s revenue was $168.1 billion in its recently completed 2021 fiscal year, which ended June 30, up 18% year-over-year.

Ives stated that Wedbush has checked with Microsoft customers to confirm that “Azure’s cloud growth story” is moving into the next stage of its growth, contrary to Wall Street expectations that cloud revenue growth would be slowed by the return to work after the pandemic.

These two developments led to Wedbush raising its target price for Microsoft’s 12-month stock market share from $325 to $350, and putting it at $350.

In a blog post, Jared Spataro (corporate vice president, Microsoft 365), stated that Microsoft’s recent price hike “reflects the greater value we have provided to our customers over 10 years.”

This is how price rises work.

  • Microsoft 365 Business Basic (from £5 to $6 per User)
  • Microsoft 365 Business Premium (from $22 to $20)
  • Office365 E1 starting at $8-10
  • Office365 E3 (from $23 to $20)
  • Office365 E5 (from 35 to $38)
  • Microsoft 365 E3 (from $22 to $356)

Microsoft shares ended Friday closing at 304.35. This is up 3.7% from the previous week.

Publited Sat, 21 August 2021 at 17:49:23 (+0000).

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