Microsoft’s Office 365 price increase could be $5B boost for its business, analyst estimates

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An upcoming Microsoft 365 business software subscription price hike announced this week promises to boost business by up to $ 5 billion annually, an analyst predicts.

Microsoft plans to increase the price of its business software subscriptions, including the Office 365 core suite, starting March 1, 2022. The company calls it “the first major pricing update” since Office 365 launched in 2011 and is switching from traditional licenses to subscription pricing.

The prize hike “was a wise strategic poker move that could give Redmond another additional $ 5 billion tailwind in 2022, which gives more confidence that the numbers could continue to move higher with a view to the future,” wrote Daniel Ives, an analyst at Wedbush, in a Friday morning note to customers.

In context, Microsoft’s revenue for the recently closed fiscal year 2021 ended June 30th was $ 168.1 billion, up 18% year over year.

Ives wrote that Wedbush’s recent reviews of Microsoft customers indicate that the “Azure cloud growth story is taking the next growth spurt,” contrary to Wall Street’s belief that the return to the office after the pandemic is the growth of the cloud – would curb revenue.

Based on these two developments, Wedbush raised its 12-month stock price target for Microsoft to $ 350 per share, from $ 325 per share previously.

Microsoft’s price increase “reflects the value we have provided our customers over the past 10 years,” wrote Jared Spataro, corporate vice president for Microsoft 365, in a post this week.

This is how the price increases are distributed.

  • Microsoft 365 Business Basic (from $ 5 to $ 6 per user)
  • Microsoft 365 Business Premium (from $ 20 to $ 22)
  • Office 365 E1 (from $ 8 to $ 10)
  • Office 365 E3 ($ 20 to $ 23)
  • Office 365 E5 (from $ 35 to $ 38)
  • Microsoft 365 E3 (from $ 32 to $ 36)

Microsoft stock closed at 304.35 on Friday, up 3.7% for the week.

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