Microsoft stock experienced a significant increase on Tuesday following the company’s announcement of its pricing strategy for integrating generative artificial intelligence capabilities into its flagship Microsoft 365 software. This software suite includes popular applications such as Word, PowerPoint, Excel, Outlook, and Teams.
According to Microsoft, their new software offering called Microsoft 365 Copilot will be available to business customers at a rate of $30 per user per month. The objective of Copilot is to enhance creativity in Word, analyze data in Excel, design presentations in PowerPoint, manage Outlook inboxes efficiently, provide meeting summaries in Microsoft Teams (regardless of attendance), and offer numerous other features, as stated in Microsoft’s official announcement.
Analyst Mark Moerdler from Bernstein commented on this development, noting that the price of 365 Copilot is higher than anticipated. This pricing arrangement represents a 53% to 240% increase depending on the specific version of Microsoft 365 being used by the customer. It is worth mentioning that the announcement primarily focused on Microsoft 365 and not the more limited tools and software found in Office 365. Moerdler speculates that this strategy is aimed not only at attracting new subscriptions but also at transitioning more users to the pricier Microsoft 365.
In addition to the Copilot software, Microsoft also revealed the upcoming release of a standalone chatbot app tailored for business users—Bing Chat Enterprise. The cost of this app will be $5 per user per month.
Analyst Dan Ives from Wedbush expressed strong optimism about the pricing announcement, stating that it is “very bullish” for Microsoft’s opportunity in the cloud AI market. He believes that it has the potential to increase annual cloud revenue by 20% by 2025. Similarly, Citi analyst Tyler Radke commented that the pricing announced by Microsoft exceeded his own forecast range of $5 to $20 per month. Radke acknowledged that although general availability of these new offerings may still be months away, this news is undeniably positive for the company’s growth.
Microsoft’s stock rose by 5.3% to reach $364, with shares hitting an intraday record high of $366.78 earlier in the session.
