Microsoft Teams Licensing Guide 2026: Plans, Pricing, and What Changed

How Teams Licences Are Structured in 2026

Microsoft Teams was unbundled from Microsoft 365 in the EU in April 2024, and in markets including the US in October 2024. For enterprise buyers, that separation created a new licensing decision — include Teams in your M365 plan, or acquire it separately. In 2026, with E7 now available at $68.90/user/month and Teams Phone priced as a separate add-on, the financial stakes of getting this decision wrong have never been higher.

Starting in April 2024, Microsoft restructured its enterprise licensing in certain markets to separate Teams from the core M365/Office 365 suites. New enterprise customers in markets affected by the European Digital Markets Act can now purchase Teams standalone at $5.25 per user per month (Teams Essentials), or with a Microsoft Teams Enterprise licence at a similar rate, while licensing M365 productivity separately. For organisations outside affected regions, Teams remains bundled into E1, E3, E5, and E7 suites.

The practical consequence for most enterprise buyers is that Teams access flows from the M365 plan tier, and the question of which plan to deploy is also, in part, a question of which Teams features the organisation needs. Features like custom meeting templates, intelligent recap, live translation, and branded meetings require Teams Premium on top of the base Teams licence — and understanding exactly which features sit in which licence tier is now essential knowledge for any procurement or IT lead.

The Four M365 Enterprise Tiers and Teams in 2026

The current M365 enterprise SKU ladder runs E1, E3, E5, E7. Each tier includes Teams and a progressively richer feature set. Here is what each tier provides for Teams and broader collaboration:

Microsoft 365 E1 — Entry Level

E1 is priced at approximately $10.50 per user per month and provides web and mobile versions of Office apps, Exchange Online (50 GB mailbox), SharePoint, OneDrive (1 TB), and Teams. It does not include desktop Office applications. E1 is appropriate for task workers, contractors, and roles that need collaboration and email access without the full productivity suite. Teams features at E1 level include meetings, calls, chat, and file sharing — the core collaboration stack without advanced features.

Microsoft 365 E3 — Enterprise Standard

E3 is the enterprise workhorse, priced at $39 per user per month (rising slightly from July 2026). E3 includes the full desktop Office suite, Exchange Online Plan 2 (100 GB mailbox with unlimited archive), SharePoint Plan 2, OneDrive for Business, Windows 11 Enterprise, Entra ID P1, Intune Plan 1, and eDiscovery Standard. Starting July 2026, E3 also includes Defender for Office 365 P1 and Intune P2 at no additional cost — a meaningful improvement in the base security posture at the E3 tier.

Teams features at E3 level include all core collaboration plus Teams Rooms Basic (up to 25 rooms), standard meetings, webinars (basic), live events, and collaboration with external users. E3 is the right choice for the majority of knowledge workers who do not require E5-level security, advanced compliance, or AI capabilities. For organisations with compliance requirements at the E3 level, E3 provides eDiscovery Standard which covers most audit and litigation hold scenarios outside heavily regulated industries.

Microsoft 365 E5 — Enterprise Premium

E5 is priced at $60 per user per month (list) and adds the full security and compliance stack above E3: Defender for Endpoint P2, Defender for Identity, Defender for Cloud Apps, Entra ID P2, Phone System (for Teams Phone without a separate add-on), Audio Conferencing, Power BI Pro, eDiscovery Premium, Insider Risk Management, Communication Compliance, and Advanced Audit. E5 also includes Entra ID P2, which enables Privileged Identity Management and Identity Protection — features that are critical for organisations in regulated industries.

For Teams specifically, E5 adds the Phone System component, meaning E5 users can activate Teams Phone without a separate $10 per user per month add-on. Audio Conferencing is also included, enabling dial-in access to Teams meetings. For large organisations with complex security and compliance requirements, E5 remains a strong choice — but it is critical to understand that E5 is not the top tier available in 2026. Microsoft has introduced E7 above E5.

Microsoft 365 E7 — The New Top Tier

E7 is Microsoft's new flagship enterprise SKU, launched May 1, 2026, at $99 per user per month. It is the first new enterprise tier above E5 since E5 launched in 2015, and it represents a fundamental change in how Microsoft packages AI and advanced identity capabilities. E7 includes everything in E5 and adds Microsoft 365 Copilot (the AI assistant that was previously a $30 per user per month standalone add-on), Agent 365 (the control plane for deploying and managing AI agents across the enterprise, available separately at $15 per user per month from May 2026), and the Microsoft Entra Suite (advanced identity governance and access management capabilities).

The E5-to-E7 upsell story is the dominant motion Microsoft's field teams are running at 2026 EA renewals. The value proposition is straightforward: organisations already paying $57 per user per month for E5 plus $30 for M365 Copilot are effectively paying $87 per user per month. E7 at $99 adds Agent 365 and Entra Suite on top of that, making it a credible bundle for organisations with high AI adoption intent. However, for organisations that have not yet broadly deployed Copilot or that have limited identity governance requirements, E7 may represent significant shelfware.

From a Teams perspective, E7 does not add materially different Teams meeting features beyond what E5 provides — the incremental value is in Copilot integration within Teams (meeting transcription, intelligent recap powered by Copilot, and Copilot in Teams chat) and Agent 365 governance. Organisations evaluating E7 should assess actual Copilot adoption rates before committing to the full uplift.

Teams Standalone Licensing

For organisations that need Teams without the full M365 suite, Microsoft offers Teams Essentials at $4 per user per month (covering chat, meetings, and file sharing via OneDrive and SharePoint integration) and Microsoft Teams Enterprise at $5.25 per user per month, which adds IT management, compliance, and enterprise security integrations. Neither includes Exchange Online or the Office desktop applications.

Teams standalone licensing is primarily relevant in three scenarios: organisations that have an existing non-Microsoft productivity suite (Google Workspace, for example) and want Teams for voice and video; subsidiaries or joint ventures that need Teams access but are not in scope for the main enterprise EA; and frontline worker populations where full M365 access is not cost-justified but Teams collaboration is required.

Teams Add-On Licences

Beyond the base plan tiers, Microsoft offers a series of Teams-specific add-on licences. Each add-on addresses specific use case requirements and carries its own pricing and eligibility rules.

Teams Premium — $10 Per User Per Month

Teams Premium is the intelligent meetings add-on, priced at $10 per user per month (approximately $8 at EA discount). It adds AI-powered meeting features including intelligent recap, meeting summary, custom meeting templates, watermarking, end-to-end encryption, meeting themes, advanced meeting analytics, and live translation across 40 languages. April 2026 brought a significant change: advanced town hall and webinar features that previously required Teams Premium (including event theming and registration customisation) moved into the standard Teams core licence. This means organisations that purchased Teams Premium primarily for webinar and town hall capabilities should reassess whether the remaining Teams Premium feature set justifies the per-user cost at their current deployment scale.

Teams Phone — $10 Per User Per Month

Teams Phone (formerly the Phone System add-on) enables full PSTN calling through Teams. It is included in M365 E5 but requires a $10 per user per month add-on for E3 and below. Teams Phone provides the Phone System engine but does not include call minutes — organisations also need to provision PSTN connectivity through Microsoft Calling Plans, Operator Connect, or Direct Routing. The PSTN connectivity model is where the most significant cost differences arise and is covered in detail in the Teams Phone licensing guide.

Microsoft 365 Copilot — $30 Per User Per Month (or included in E7)

Microsoft 365 Copilot is the AI assistant integrated across M365 apps including Teams, Word, Excel, PowerPoint, Outlook, and Loop. Within Teams specifically, Copilot provides meeting summaries, action item extraction, real-time question answering during meetings, and chat summarisation. At $30 per user per month standalone, Copilot is the most expensive single add-on in the M365 catalogue. It is included in E7, which makes E7 economically attractive for organisations with broad Copilot deployment intent. For selective Copilot deployment (25 to 30 percent of users), standalone Copilot licensing remains more cost-effective than upgrading the entire estate to E7.

Teams Rooms Licences

Meeting room devices require separate Teams Rooms licensing. Teams Rooms Basic is free for up to 25 rooms and provides core meeting join, scheduling, and content sharing. Teams Rooms Pro at $40 per room per month adds AI-enhanced video and audio, intelligent speaker recognition, front row view, dual screen support, and advanced device management. Organisations with more than 25 meeting rooms require Pro licences for rooms beyond the first 25. See the Teams Rooms licensing guide for a full analysis.

April 2026 Licensing Changes

Microsoft made meaningful changes to Teams licensing effective April 1, 2026, with direct cost implications for enterprise buyers. The most significant change was the movement of advanced webinar and town hall features from Teams Premium into the standard Teams licence. Features that now require only a standard Teams licence (previously required Premium) include advanced webinar registration and management, custom event themes, email customisation for events, and events for up to 100,000 attendees (via capacity packs).

Microsoft Places — the workplace coordination and desk/room booking application — also received expanded licensing in April 2026, with core Places features moving into standard Teams Enterprise licences. Advanced Places features (analytics, space optimisation, and hybrid workforce reporting) remain behind a Teams Premium or standalone Places add-on licence.

The practical implication is that organisations should audit their Teams Premium deployments against the post-April 2026 feature list before their next renewal. Any Teams Premium licences assigned solely for webinar or town hall functionality should be released, generating immediate cost savings.

July 2026 Price Increases

Microsoft has announced pricing updates effective July 1, 2026, affecting M365 E3, E5, and several standalone products. The price changes are modest in percentage terms (typically 3 to 8 percent) but material in absolute terms for large enterprise deployments. Organisations with EA renewals landing in the second half of 2026 should model the post-July pricing in their renewal scenarios and consider whether advancing the renewal negotiation to Q2 2026 — during Microsoft's Q4 pressure window — makes commercial sense given current price lock provisions.

Microsoft's Q4 (April to June 30) remains the highest-leverage window for buyers. Microsoft's fiscal year ends June 30, and field teams have maximum incentive to close and discount deals in this period. Any organisation with a renewal falling within 12 months of June 2026 should evaluate whether accelerating to close before June 30, 2026 would deliver meaningful pricing benefits versus waiting for the contractual renewal date.

Teams Licensing by User Segment

Applying the right Teams licence to each user population — rather than licensing the entire organisation at the highest common denominator — is the single most impactful cost optimisation lever in most M365 estates.

Knowledge Workers (Core Office + Collaboration)

The majority of office-based knowledge workers are fully served by E3. E3 provides the complete Office productivity suite, Exchange, SharePoint, Teams, OneDrive, Windows 11 Enterprise, Entra ID P1, and from July 2026 Defender for Office P1 and Intune P2. Upgrading knowledge workers to E5 is justified primarily when their role-specific security, compliance, or advanced analytics requirements are genuine — not as a default. Upgrading to E7 is justified when actual M365 Copilot adoption is broad and governed (not piloted or aspirational).

Frontline Workers

Frontline Workers (retail associates, warehouse staff, field service technicians) are served by Microsoft 365 F1 ($2.25 per user per month) or F3 ($8 per user per month). F1 provides Teams with limited meeting features and web/mobile apps only. F3 adds desktop Office apps and Exchange. Teams features for frontline roles include shift management (Teams Shifts), walkie-talkie voice communication, task management, and frontline-specific approval flows. Assigning E3 or E5 to frontline roles represents common and avoidable shelfware.

Executives and High-Compliance Roles

Senior executives, legal, compliance, and finance roles with elevated security and compliance requirements are appropriately served by E5 or E7 depending on AI adoption. E5 provides the identity protection, communication compliance, and advanced eDiscovery capabilities that regulators and audit requirements typically mandate for senior roles in financial services, healthcare, and regulated industries. E7 is appropriate for executives where Copilot for Teams (meeting summarisation, action item tracking, and executive briefing generation) is actively deployed and delivering productivity gains.

Common Teams Licensing Mistakes

Licensing the entire estate at E5 or E7: The most common and expensive mistake. The vast majority of users do not require E5 security or E7 Copilot capabilities. A properly segmented estate typically places 60 to 70 percent of users on E3, 20 to 30 percent on E5, and 5 to 15 percent on E7.

Retaining Teams Premium licences after April 2026 without a feature audit: With webinar and town hall features moving to core Teams, Teams Premium now delivers value primarily through AI meeting features — intelligent recap, live translation, and meeting coaching. Organisations should confirm actual usage of these specific features before renewing Teams Premium at scale.

Adding Teams Phone as an E3 add-on without modelling PSTN connectivity: Teams Phone at $10 per user per month is only the phone engine — PSTN connectivity costs are additional and vary significantly by deployment model. Direct Routing and Operator Connect typically deliver 40 to 60 percent savings over Microsoft Calling Plans for organisations with 200 or more calling users.

Assuming E7 is justified because Copilot is on the roadmap: Microsoft field teams present E7 as the natural next step for any organisation that has expressed AI intent. The financial case only holds when Copilot is actively deployed at scale, not when it is planned or piloted. Deploying standalone Copilot to the 20 to 30 percent of users who will actually use it costs significantly less than upgrading the entire estate to E7.

Not negotiating Teams add-on pricing within the EA: Teams Phone, Teams Premium, and Microsoft 365 Copilot are all negotiable line items within an EA. Standard EA discounts of 10 to 20 percent below list apply to add-ons just as they do to base plan SKUs. Organisations that accept list price for add-ons while negotiating only the base SKU leave money on the table.

Optimisation Recommendations for 2026

The most impactful Teams licensing optimisation steps for 2026 are, in order of typical impact: conduct a user-segment audit to identify E5 users who are deployable on E3 (releasing $21 per user per month per downgraded seat); review all Teams Premium licences against the post-April 2026 feature list and release licences where the remaining feature set is not being used; model the EA versus NCE economics for the specific SKU mix required (NCE monthly carries no discount, NCE annual caps at 5 percent, EA delivers 10 to 20 percent at enterprise scale); negotiate Teams Phone and Copilot add-on pricing explicitly within the EA rather than accepting list price; and evaluate whether the Q4 (May–June 2026) window offers a price-lock opportunity before July price increases take effect.

For organisations considering E7, the financial assessment should be built bottom-up: start with current E5 spend, add the actual Copilot add-on cost for current or planned Copilot users, and compare against E7 at negotiated rates. In many organisations, selective Copilot deployment (rather than E7 for all) remains the lower-cost outcome even accounting for the E7 bundle premium.