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

An upcoming price increase for Microsoft 365 enterprise software program subscriptions, announced this week, guarantees to boost its enterprise by as a lot as $5 billion yearly, one analyst predicts.

Microsoft plans to boost the price for its enterprise software program subscriptions, together with its core Office 365 suite, beginning on March 1, 2022. The corporate calls it “the primary substantive pricing replace” because it launched Office 365 back in 2011, shifting from conventional licenses to subscription pricing.

The price increase “was a sensible strategic poker transfer that could be one other $5 billion+ incremental tailwind for Redmond in 2022, giving extra confidence that numbers could proceed to maneuver up increased wanting forward,” wrote Daniel Ives, an analyst with Wedbush, in a be aware to shoppers Friday morning.

For context, Microsoft’s income was $168.1 billion in its recently completed 2021 fiscal year, which ended June 30, up 18% year-over-year.

Ives wrote that Wedbush’s newest checks with Microsoft prospects point out that the “Azure cloud progress story is hitting its subsequent gear of progress,” opposite to Wall Avenue assumptions that the return to the workplace after the pandemic would put the brakes on cloud income progress.

Primarily based on these two developments, Wedbush raised its 12-month inventory price goal for Microsoft to $350 per share, from $325 per share beforehand.

Microsoft’s price increase “displays the elevated worth we’ve got delivered to our prospects over the previous 10 years,” wrote Jared Spataro, company vice chairman for Microsoft 365, in a post this week.

Right here’s how the price will increase break down.

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