AI Version of Office Pricing Released, Far Exceeding Expectations! Microsoft May Be Creating Another Microsoft!

Artificial Intelligence (AI) version of Office 365 is priced much higher than expected. What does it mean? Microsoft may be creating another Microsoft!

On Tuesday, Microsoft announced at its global partner conference that the price of Microsoft 365 Copilot for commercial customers will be $30 per user per month. They will also introduce Bing Chat Enterprise in the future, offering a separate subscription for AI-supported chat functionality at a price of $5 per month.

It is worth noting that the monthly fee of $30 is far beyond the range of $5 to $20 previously expected by Wall Street analysts. How much more expensive is it exactly?

According to Guosheng Securities' calculations, based on the current subscription prices for the four commercial editions, the overall subscription price increase with the addition of Copilot is estimated to be around 53-240%.

However, despite the astonishing price increase of Microsoft's suite of products, investors are very receptive, driving Microsoft's stock price up by 4% overnight. Citigroup analysts even stated that the $30 price is "extremely favorable" for Microsoft.

Guosheng Securities also believes that the AI version of Office may be the key to Microsoft's future revenue:

With a 25% increase in penetration rate for Copilot and Bing Chat Enterprise in the commercial edition, it is expected to bring in an incremental revenue of over $40 billion! In an extreme scenario, assuming that the penetration rate of these products in the commercial edition is close to 100%, the incremental revenue could be close to creating another Microsoft!

Based on Microsoft's financial report, the revenue from Microsoft Office commercial edition products and cloud services in the 2022 fiscal year was approximately $35.3 billion. It is estimated that the average paid seats for the Microsoft commercial edition as of Q3 2023 is around 382 million.

Assuming the current number of paid seats remains the same:

• Copilot: Calculated at an additional $30 per user per month, each paid seat will generate an additional $360 per year. With a 25% increase in penetration rate for Copilot in the commercial edition, it can bring in an incremental revenue of $34.4 billion.
• Bing Chat Enterprise: Calculated at an additional $5 per user per month, each paid seat will generate an additional $60 per year. With a 25% increase in penetration rate for Bing Chat Enterprise in the commercial edition, it can bring in an incremental revenue of $5.7 billion.

Guosheng Securities also predicts that the continuous evolution of AI models within the track and the progress of applications such as Copilot are expected to bring improvements to Microsoft's various businesses:

1. Office software: It is expected to achieve an increase in Microsoft Office cloud product paying users and ARPU in the future;

2. Cloud computing: AI may reshape the cloud computing landscape, and MaaS services may emerge. With priority layout on large models and the cloud ecosystem supported by its own interaction, Microsoft's market share in the cloud is expected to continue to rise.