Microsoft Delays Copilot Usage Billing to December 1

Microsoft has announced a delay in implementing usage-based billing for new Copilot Business subscriptions sold through resellers. Initially set to take effect on November 2, the change has been pushed back to December 1, giving partners an extra month to prepare. This adjustment follows the launch of sandbox environments on November 2, allowing resellers to test the new setup. Under the updated model, advanced tasks like Copilot Cowork will consume Copilot Credits at a rate of $0.01 each, with a default cap of 4,000 credits per user per month.

The shift to usage-based billing reflects a broader strategic move by Microsoft to evolve its business model. During the Q4 2026 earnings call, CEO Satya Nadella highlighted the company's transition to a 'per seat plus consumption' approach. This change is expected to improve margins, similar to the impact seen with GitHub Copilot, which moved to usage-based billing in June 2026. CFO Amy Hood noted that GitHub Copilot's margins improved through the quarter following the switch.

Despite the shift in billing, Microsoft's Productivity and Business Processes segment continues to grow. Revenue for this segment reached $140.00 billion in fiscal 2026, up from $120.81 billion a year earlier. However, the company's gross margin slipped from 69.05% to 67.20% over the last three quarters, partly due to rising Copilot usage. Hood attributed the decline to a shift toward Azure, AI infrastructure investment, and increased product usage.

Microsoft anticipates that usage-based billing will help accelerate revenue growth for Microsoft 365 Commercial cloud through fiscal 2027. The delay in automatic enrollment for reseller purchases does not affect the introduction of usage billing itself. Fiscal Q2 results could provide early insights into the uptake of this new model, although its full impact on company-wide margins remains to be seen.