Key Takeaways
- Microsoft pushed default usage-based billing for new Copilot Business subscriptions sold through resellers from November 2 to December 1, giving partners time to test new sandbox environments.
- Productivity and Business Processes revenue grew to $140.00 billion in fiscal 2026, up from $120.81 billion a year earlier.
- Gross margin slipped from 69.05% to 67.20% over the last three quarters, and management tied part of that to rising Copilot usage.
Microsoft Delays Copilot’s Usage Billing by a Month
New Microsoft (MSFT) 365 Copilot Business subscriptions sold through its Cloud Solution Provider program will begin defaulting to usage-based billing in supported markets on December 1, not November 2, Microsoft announced on October 1.
The extra month lets resellers prepare using sandbox environments that launch November 2. Under the new setup, advanced tasks such as Copilot Cowork consume Copilot Credits at $0.01 each, with a default cap of 4,000 credits per user per month.
The delay is small. The shift behind it is not. On Microsoft’s Q4 2026 earnings call, CEO Satya Nadella said the company is “evolving our business model beyond per seat to per seat plus consumption.”
Why Usage Billing Matters for MSFT Stock
The segment that houses Microsoft 365 is still growing at a healthy pace. Productivity and Business Processes revenue rose about 16% to $140 billion in fiscal 2026.
Microsoft’s company-wide gross margin fell from 69.05% in the September 2025 quarter to 67.20% in the June 2026 quarter. Hood attributed Q4’s year-over-year decline to a shift toward Azure, AI infrastructure investment, and growing product usage, partly offset by efficiency gains.
CFO Amy Hood said the segment’s gross margin percentage “decreased slightly with increased M365 Copilot usage.” Heavy users cost Microsoft more to serve, while a flat seat price charges them the same as light users.
GitHub Copilot shows what usage pricing can do. After that product moved to usage-based billing in June, Hood said its margins “improved through the quarter.”
Microsoft expects the same model to help Microsoft 365. Hood guided for M365 Commercial cloud revenue growth to accelerate through fiscal 2027, citing usage-based billing products added alongside per-seat licensing.
The December 1 change delays automatic enrollment for eligible reseller purchases, rather than the introduction of usage billing. Fiscal Q2 results could offer an early indication of uptake, though company-wide margins will not isolate its impact.
Usage billing helped GitHub Copilot’s margins. Microsoft 365 is next. Analyze MSFT’s estimates as Copilot pricing changes on TIKR for free →
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