Microsoft Introduces $99 AI-Powered 365 E7 Tier as Azure Revenue Surges 39%
Microsoft will launch a $99-per-user-per-month Microsoft 365 E7 tier on May 1, adding Copilot, Entra and Agent 365 after $100 B data center investments. Azure and other cloud services revenue rose 39% YoY to $32.9 B in Q2 FY26, while shares are down 16% YTD on capacity constraints.
1. Microsoft 365 E7 AI Subscription
On May 1, Microsoft will roll out its new Microsoft 365 E7 enterprise subscription at $99 per user monthly, replacing the $60 E5 plan. The E7 tier bundles $30 Copilot, $12 Entra identity services and the new $15 Agent 365 AI agent management tool, reflecting more than $100 billion invested in data center infrastructure over the past year.
2. Azure and Intelligent Cloud Performance
In Q2 FY26, Azure and other cloud services revenue increased 39% year-over-year to $32.9 billion, driving the Intelligent Cloud segment to a 29% gain. Microsoft 365 Copilot seats grew to 15 million (up 160% YoY), and over 80% of Fortune 500 companies now deploy AI agents via Copilot Studio or Agent Builder.
3. Capacity Constraints and Market Response
Management acknowledged that demand for AI capacity exceeds available supply after adding nearly one gigawatt of infrastructure in the quarter. Shares of Microsoft are down 16% year-to-date, trading at a forward 12-month price/sales ratio of 8.45x versus the industry 7.11x, as investors weigh growth potential against margin pressure from continued AI investments.