Zhi Tong Cai Jing·2025-08-21 04:17Core Viewpoint - Microsoft plans to stop offering discounts on Microsoft 365 subscriptions and other cloud software products, potentially leading to price increases of 10% or more, as indicated by industry analysts [1][4]. Group 1: Pricing Changes and Financial Impact - UBS analysts believe that the pricing changes are likely already factored into Microsoft's recent performance guidance, but new subscription revenue is expected to be stronger, particularly with the anticipated growth of Microsoft 365 and "Copilot for Microsoft 365" subscriptions [1][2][7]. - The price changes will take effect on November 1 for new service agreements or renewals, affecting large companies with sufficient employees [3][4]. - Microsoft aims to provide more consistent and transparent pricing, which aligns with its commitment to higher transparency across all purchasing channels [3][4]. Group 2: Market Reactions and Stock Performance - Following the announcement of potential price increases, Microsoft's stock rose over 6%, contributing to a market capitalization of $4 trillion, making it the second company to reach this milestone after Nvidia [3]. - UBS maintains a "buy" rating on Microsoft, with a 12-month price target of $650, citing the company's significant influence in the AI application space [2]. Group 3: Product Offerings and Customer Response - Microsoft 365's enterprise version includes various applications and services, with the potential for additional revenue from the AI-powered "Copilot for Microsoft 365," which is not included by default in subscriptions [6][8]. - Analysts expect most customers to agree to pay higher fees to continue using Microsoft's unique applications rather than switching to less popular alternatives [5]. - The growth in Microsoft 365 seat licenses has been below 10% since 2023, prompting Microsoft to push for sales of the AI-powered Copilot add-on to enhance revenue per seat [4][7].