Microsoft reported that Office 365 commercial seat count climbed from 325 million at the end of 2024 to 375 million by Dec. 31, 2025, marking a 15% year-over-year gain. Growth was fueled by expansion within mid-market and enterprise customers, where seat count rose 18% and 22%, respectively. Activations of its higher-tier Microsoft 365 E5 plan accounted for 40% of new net adds during the quarter, up from 28% a year earlier, enhancing average revenue per user by 12%.

On the consumer side, Office 365 subscriptions increased from 53 million to 58 million over the same period, a 10% rise. Microsoft attributed 70% of these new subscriptions to its Edge-integrated AI writing assistant and Teams Premium video-calling features, which have lifted consumer ARPU by 8%. Bundled promotional offers with Xbox Game Pass and Surface device sales accounted for 25% of new sign-ups.

Revenue per Office 365 user climbed to $8.30 per month in Q4 2025, compared with $7.40 in Q4 2024, driven largely by adoption of AI-driven capabilities such as Copilot integration in Word, Excel and Teams. Microsoft reported that customers leveraging Copilot in their workflows saw a 35% reduction in routine task time, prompting 45% of enterprise clients to upgrade at least one seat to a Copilot-enabled plan during the quarter.

Microsoft’s strong subscription growth and rising ARPU underscore the durability of its software-as-a-service model. With Office 365 comprising over 30% of the company’s Intelligent Cloud segment revenue—and that segment growing 18% year over year—analysts forecast another 12–15% growth in cloud subscription revenue for fiscal 2026. Continued upsell into AI-powered tiers could drive operating margins higher by 50–75 basis points, supporting further stock outperformance.