Definitive Guide to Microsoft Copilot Licenses

Written by John Gruber Published on Jan 26, 2026 Last Updated on Jan 26, 2026

The Microsoft Copilot ecosystem has undergone significant evolution, marked by frequent rebranding and a shifting licensing structure. To help organizations navigate this complexity, the following summary provides a definitive breakdown of the current Microsoft Copilot licensing tiers as of 2026. For a PDF executive brief, download Microsoft Copilot Executive Brief
Copilot Licenses Explained Cover Image

Microsoft Copilot (free)

This is the standard consumer version of Microsoft Copilot that's available to all users. Accessing https://copilot.microsoft.com opens the chat interface. This experience is the consumer AI assistant integrated into Bing, Microsoft Edge, Windows, and the Copilot app. It operates primarily as an internet-based service, doesn't have access to organizational or business data, and is limited to the context provided within the current chat session.

Microsoft 365 Copilot Chat (Included with Microsoft 365 subscription)

Now commonly called Copilot Chat, is the AI model accessible to all licensed organizations. It integrates into Microsoft applications like Teams, Outlook, Word, and Excel, and it introduces a robust no-code ecosystem for Custom AI Agents. This allows businesses to build custom chatbots that securely use organizational data to automate complex workflows.

The Microsoft 365 Copilot Chat does not provide answers based on content in your environment that you do not inform the current chat to access. For example, a new employee can't open the Copilot Chat and ask how to get in contact with HR and expect an answer based on your organization.

Note, Microsoft 365 Copilot Chat has no awareness of role, region, org structure, or any of your data unless you explain it manually, but this will be changing July 1, 2026.

Copilot Pro License

Microsoft Copilot Pro is dead. Microsoft discontinued the standalone Copilot Pro subscription in late 2025 and replaced it with a bundled consumer plan called Microsoft 365 Premium.

Microsoft 365 Premium License

This is different than Microsoft 365 Business Premium. Microsoft 365 Premium is the new version of Copilot Pro. It's for individual users. It contains the Microsoft Office suite, OneDrive, and a few other applications. It also includes what was formerly Copilot Pro. It contains the Microsoft Copilot (free) agent with the latest reasoning engine, faster prompts, better image quality, etc. To recap, Microsoft 365 Premium is not for businesses. It's for individuals who want more from Copilot.

Microsoft 365 Copilot app

Not actually a license, but it needs to be said. The core Office software suite (Word, Excel, PowerPoint) is not being renamed the Microsoft 365 Copilot app. Microsoft has rebranded its hub app, which was previously the Microsoft 365 app for web, mobile, and Windows, to the "Microsoft 365 Copilot app" as of January 2025 to integrate AI features. The URL will redirect to https://m365.cloud.microsoft/.

Microsoft 365 Copilot Business License

The cheapest Copilot offering that's provided to businesses. It uses Work IQ, which means it will search SharePoint sites, documents, emails, etc. that you have access to, and find an answer.

You'll also gain access to Copilot Researcher and Copilot Analyst, which can use your data, web searches, and pull in information from a ton of different locations to get you a very thorough answer to almost any question.

Note, it cannot provide an answer you don't have access to. For example, if there's a SharePoint site with everyone's salary listed and you don't have access to that SharePoint site, you won't be able to see the salary information.

Microsoft 365 Copilot Business is an add-on license. You need one of the following licenses: Microsoft 365 Business Basic, Microsoft 365 Business Standard, Microsoft 365 Business Premium, or Microsoft 365 Apps for Business.

Microsoft 365 Copilot Business is designed for organizations with up to 300 users, though it can be combined with other enterprise plans in a single tenant. For example, you can have 300 Microsoft 365 Business Premium users with 300 Microsoft 365 Copilot Business licenses and 10,000 Microsoft 365 E5 users with 10,000 Microsoft 365 Copilot licenses.

Microsoft 365 Copilot License

Microsoft 365 Copilot, sometimes referred to as Microsoft 365 Copilot Enterprise, has the same offering as Microsoft 365 Copilot Business, but it's for enterprises.

Microsoft 365 Copilot is an add-on license. The person with the Microsoft 365 Copilot license will need any Microsoft 365 license, including but not limited to: Microsoft 365 E1/E3/E5, Microsoft 365 Business Standard/Premium, Office 365 E1/E3/E5

It uses Work IQ, which means it will search SharePoint sites, documents, emails, etc. that you have access to, and find an answer. Note, it cannot provide an answer you don't have access to. For example, if there's a SharePoint site with everyone's salary listed and you don't have access to that SharePoint site, you won't be able to see the salary information.

Microsoft Copilot Studio Pay-as-you-go License

While standard Copilot licenses cover internal staff, Microsoft Copilot Studio is required for external-facing bots (like a customer support chat on your website) or Autonomous Agents that run in the background.

This is a consumption-based model using Copilot Credits. Instead of paying per user, you pay for the 'work' the agent does. A simple response might use a few credits, while a complex task involving external data or generative AI will use more. You can buy these in packs (See the Microsoft Copilot Studio license below) or use a Pay-as-you-go meter linked to an Azure subscription to ensure your bot never goes offline due to high traffic.

The pay-as-you-go is typically recommended for small-scale use, like testing before go-live or as an overage on the standard Microsoft Copilot Studio license.

The pay-as-you-go licensing can be fairly confusing, but you can use the Microsoft Copilot Studio Calculator to estimate the costs.

Note, Microsoft Copilot Pay-as-you-go licenses will only be used in a couple of scenarios:

The user is outside your organization.
The agent is running Autonomously (without a user requesting the action). These can be triggered based on receiving an email, a change in the CRM, or any number of other options.

So if you only need Microsoft Copilot for internal employees, then you can stick with the Microsoft 365 Copilot license.

Microsoft Copilot Studio License

Formerly Power Virtual Agents, think of the Microsoft Copilot Studio license as a Microsoft Copilot Studio Pay-as-you-go pack. It contains 25,000 Copilot credits.

A Microsoft Copilot Studio license is for building, customizing, and managing your own AI copilots inside the Microsoft ecosystem that will be used Autonomously or by users outside your organization.

For example, if you'd like to build a chatbot to use inside your website, you'll need Copilot credits, and they can be purchased through the Microsoft Copilot Studio license.

Another example, if you have a support mailbox where people can email you to get support on your product, and you'd like Copilot to be the first response, you'll need Copilot credits that can be purchased through the Microsoft Copilot Studio license.

You do not need a Copilot Studio license if your app does not work autonomously or is not used by people outside your organization.

Microsoft Copilot Studio User License

This is the most misunderstood license. The most important distinction is that end-users who chat with your bot rarely need this license. The Microsoft Copilot Studio User License is required for the people building the agents (developers, bot authors, and admins). It grants them access to the Copilot Studio authoring portal (https://copilotstudio.microsoft.com), so only developers and administrators will need this license.

The Microsoft Copilot Studio User license (USL) is a $0 license required for developers. You'll want to assign to your Copilot developers and administrators who will manage the Copilot environment, but there is a prerequisite. You'll need to own at least one Microsoft Copilot Studio license before you have the Microsoft Copilot Studio User license available to you.

Microsoft Dragon Copilot License

Microsoft Dragon Copilot is a specialized AI assistant designed specifically for the healthcare industry. The Microsoft Dragon license is the successor and unifier of two very famous medical tools: Dragon Medical One (DMO) and DAX Copilot. If you aren't in the medical field, you likely won't encounter it, but it is currently one of Microsoft's most advanced industry-specific AI products.

Unlike Copilot Studio, which is a platform for building bots, Dragon Copilot is a ready-to-use clinical assistant. Its primary job is to solve the "burnout" problem for doctors.

You can think of Microsoft Dragon Copilot as a Copilot agent that Microsoft built on top of Microsoft Copilot for the medical industry.

Microsoft Dragon Copilot has 3 main benefits:

Ambient Listening (Ambient Recording): It sits in the room during a patient visit (with consent) and listens to the conversation.
Automated Charting (Generative AI Note Creation): It automatically converts that conversation into a structured medical note (SOAP note) that is ready to be put into the Electronic Health Record (EHR) system like Epic or Cerner.
Medical Search: A clinician can ask it questions like, "What are the current protocols for treating X?" and it searches trusted medical references rather than the open web.

Dragon Copilot (Physician Per User)

Dragon Copilot (Physician Per User) is the "All-You-Can-Eat" model. It is designed for doctors who plan to use the AI for almost every patient encounter. You get unlimited use of all features: Front-end Dictation (standard voice-to-text), Ambient Recording (listening to the patient visit), and Generative AI Note Creation.

Dragon Copilot (Physician Flex)

This is the "Hybrid / Pay-as-you-go" model. It separates basic tools from advanced AI features. The base subscription only covers Front-end Dictation. Ambient Recording and Generative AI are disabled by default. When a doctor uses them, the organization is billed per use (measured in "Consumption Units") via a linked Azure Subscription. The Cost is roughly $0.01 per unit. Generating a full structured clinical note typically costs around 300 units ($3.00) per encounter.

The cost per encounter varies by complexity; check the Azure Meter for current Consumption Unit rates.

The Physician Flex license is designed for part-time doctors and specialists who only need AI for complex cases, or organizations that want to test the technology without committing to a massive upfront seat cost for every employee.

Summary

If you're a business that wants to try out Copilot, start with the Microsoft 365 Copilot Chat free plan that's included in your Microsoft 365 subscription. If you're looking to up your Copilot work for internal use, go with the Microsoft Copilot Business license (if you're a small business) and the Microsoft 365 Copilot license (if you're an enterprise).

If you're looking to fully automate Copilot or make Copilot available to people outside your organization, go with a Microsoft Copilot Studio License + Microsoft Copilot Studio Pay-as-you-go License for overages. Assigning a Microsoft Copilot Studio User License to internal users who may need access to the tools.

If you're in the medical industry and want to try Copilot, go with the Dragon Copilot (Physician Flex). When you're ready for a complete rollout, assign a Dragon Copilot (Physician Per User) license to your full-time staff that will use Dragon and a Dragon Copilot (Physician Flex) license to part-time users.

Finally, I believe Microsoft is planning to roll out more Copilot features and will bundle them separately. I'll try to update this document as I receive word on those changes.