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Microsoft licensing

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This article is an overview of how Microsoft licenses its cloud services, desktop and server software, and of the programs, Software Assurance, verification and hosting rules that apply across them. Product-level detail is in the linked articles. It is not legal advice and does not replace the Product Terms or a signed agreement.

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Microsoft licensing is the set of contractual rules under which organizations use Microsoft’s cloud services, desktop and server software. The rules sit in one place: the Microsoft Product Terms, which contain Universal License Terms for all software and for all Online Services, one Product Offering entry per product family, a Glossary and the Software Assurance Benefits.[1][2][13] The purchasing program (Enterprise Agreement, Microsoft Customer Agreement, Cloud Solution Provider and smaller programs) decides how licenses are ordered, priced, counted over time and renewed, but not what a license permits. Product Terms entries are published per program, and each carries program-specific conditions such as whether a product is True-Up Eligible or Reduction Eligible.[9]

For a software asset manager the Microsoft estate usually falls into four licensing families. Online Services (Microsoft 365, Dynamics 365, Power Platform, Windows 365, Copilot) are subscriptions assigned to users or devices. Desktop software (Windows Enterprise, Microsoft 365 Apps, Visual Studio) is licensed per user or per device. Server software (Windows Server, SQL Server, System Center and the other servers that need client access licenses) is licensed per core or per server, often with access licenses. Azure is billed by consumption or commitment. Software Assurance and subscription status connect the families: most virtualization, cloud migration and hosting rights exist only while a license is covered.

This article summarises each family and links to the detailed articles listed under Guides.

Product families and metrics

Microsoft 365 and other Online Services

Online Services are licensed through a User SL assigned to a single user, or through a Device SL on a single device: each user who accesses an Online Service “must be assigned a User SL or access the Online Service only through a device that has been assigned a Device SL, unless specified otherwise in the Online Service-specific Terms.”[2] Suite names such as Microsoft 365 E3, E5 and E7, Office 365 E1 to E5, F1 and F3, and Business Basic, Standard and Premium are editions of the same User SL rather than separate metrics. Microsoft 365 E7 combines Office 365 E5, Enterprise Mobility + Security E5, Windows 11 Enterprise E5 Per User, Microsoft 365 Copilot, Microsoft Agent 365 and Microsoft Entra Suite.[3] Business plans are capped at 300 subscription licenses, and from 15 June 2026 the same cap applies to Microsoft 365 Apps for business and Microsoft Teams Essentials.[19]

Some User SLs also count as on-premises access licenses. The CAL and ML Equivalency Licenses table lists which suites satisfy which Base or Additive CALs and Management Licenses; for example, Microsoft 365 E3 and E5 satisfy Exchange Server and SharePoint Server CALs, while no Microsoft 365 suite is listed as satisfying a SQL Server CAL.[4] Assignment, reassignment, Frontline Worker eligibility, Device SL limits and the equivalency table are covered in Microsoft 365 and Online Services licensing.

Microsoft 365 Copilot is “available as an add-on plan with one of the licensing prerequisites”, sold as a User SL on top of a qualifying suite, while agents built in Copilot Studio and certain Copilot Chat scenarios are metered in Copilot Credits.[11] Government G3 and G5 licenses were added as eligible Copilot prerequisites on 1 August 2026.[19] See Microsoft 365 Copilot licensing.

Windows client and Windows 365

Volume-licensed Windows desktop software is an upgrade: “Windows software acquired through a volume licensing agreement may only be installed or activated on devices licensed to qualifying operating systems”.[5] Windows Enterprise is sold per device and per user (Windows 11 Enterprise E3 and E5 SLs, and per-user add-ons to per-device licenses). For per-user licenses, the Licensed User “must be the Primary User of at least one device licensed with a Qualifying OS”, and that device must be the user’s primary work device. Per-device assignment “is permanent unless Customer has Software Assurance for that device.”[5] Virtual desktop access rights come either with those subscriptions or from Windows Virtual Desktop Access (VDA), which is also listed as a Software Assurance benefit for the Systems pool.[5][13] Windows 365 Cloud PCs are Online Services licensed per user, with Frontline variants that share Cloud PCs; they are covered in the Microsoft 365 article.

Windows Server and client access licenses

Windows Server 2025 Standard and Datacenter use the Per Core/CAL model. All physical cores of the server are licensed, subject to “a minimum of 8 Licenses per Physical Processor and a minimum of 16 Licenses per Server”, and access additionally requires User CALs, Device CALs or an External Connector, with exceptions such as access by another licensed server.[6] Standard covers two operating system environments (OSEs) per full set of core licenses; Datacenter covers any number on the licensed server. Customers with subscription licenses or active Software Assurance may instead license individual virtual machines by virtual core, with a minimum of eight licenses per virtual OSE.[6] Remote Desktop Services and Active Directory Rights Management Services need Additive CALs on top of the base CAL. Details, including Essentials and containers, are in Windows Server licensing.

The same core-plus-CAL pattern appears in other servers. System Center 2025 is licensed through Management Licenses, and on shared servers under License Mobility every 16 System Center 2025 Standard or Datacenter Management Licenses cover two or ten managed OSEs respectively.[13] Exchange Server, SharePoint Server and Skype for Business Server Subscription Editions are licensed per server with Base and Additive CALs, whose cloud equivalents are shown in the equivalency table.[4]

SQL Server

SQL Server 2025 has two license models: Per Core, available for Enterprise and Standard, and Server/CAL, available for Standard only. Per Core requires no CALs and counts physical cores with a minimum of four licenses per physical processor, or virtual cores with a minimum of four licenses per virtual OSE when licensing by virtual machine, a right that requires subscription licenses or active Software Assurance.[7] Enterprise Edition licensed by physical core with Software Assurance may run any number of instances in any number of OSEs on the licensed server, and Software Assurance adds fail-over rights, including one disaster recovery OSE on Azure.[7] SQL Server licenses are platform agnostic and may be deployed on Windows or Linux. The Windows Server 16-core minimum does not apply to SQL Server. See SQL Server licensing.

Azure

Azure services are bought through the program agreement and billed either “after the services are used (“pay-as-you-go”)” or against an upfront commitment. The Azure Product Terms describe Azure prepayment, Azure reservations and Azure compute savings plans; reservations and savings plans are bought for terms of up to three years, and savings plans are noncancellable.[8] Unused Azure prepayment is forfeited at the end of the enrollment or of each prepaid year, depending on the payment option chosen.[8]

On-premises licenses reach Azure through the Azure Hybrid Benefit. Windows Server core licenses with an active subscription or Software Assurance may be used on Azure virtual machines with a minimum of eight core licenses per VM; each Windows Server processor license counts as 16 core licenses. During migration, Windows Server Standard licenses may continue to be used on premises for 180 days after allocation to Azure, and Datacenter licenses indefinitely; otherwise licenses allocated to Azure may not be used elsewhere, and a customer may stop using them for the benefit only after at least 90 days.[8] SQL Server core licenses convert to Azure vCores at ratios that depend on the edition and the Azure service tier.[8]

Dynamics 365 and Power Platform

Dynamics 365 applications are subscriptions per user, per device or per tenant. A user who works in several core business applications needs one Base license, which “must be the highest priced license for the user”, plus discounted Attach licenses for the others: “Every full user must have a Base license.”[9] Lighter roles use Team Members or Operations Activity licenses, and certain Dynamics 365 subscription licenses carry dual use rights to the on-premises equivalent.[9] See Dynamics 365 licensing.

Power Platform (Power Apps, Power Automate, Power Pages and Dataverse) is sold through subscription licenses, add-ons and pay-as-you-go meters. The licensing guide states that “Any user or device that inputs data into queries, views data from or otherwise accesses these services directly or indirectly must be properly licensed”, which makes multiplexed and indirect access a recurring counting question.[10] See Power Platform licensing.

Developer tools

Visual Studio subscriptions are per-user licenses that allow the subscriber to use a catalog of Microsoft software to design, develop, test and demonstrate programs, but not in production.[12] Servers used only by licensed subscribers for development and test therefore need no separate server licenses. See Visual Studio subscriptions licensing.

Rules common to all software

The Universal License Terms apply across products. A license must be assigned before use, and “Customer may reassign a License to another device or user, but not less than 90 days since the last reassignment of that same License”, except for permanent hardware failure, end of employment or contract, or temporary cover for an absence.[1] Online Services have an equivalent 90-day reassignment rule.[2] Microsoft “may use technical measures to enforce terms that restrict Customer’s use of certain versions of Product and may verify compliance with those terms as provided in Customer’s volume license agreement.”[1] Rights granted through Software Assurance “end at the expiration of the SA coverage for the License, unless otherwise noted in the benefit description.”[1]

Purchasing programs

Organizations with at least 500 users or devices (250 in the public sector) can sign the Enterprise Agreement (EA), a three-year agreement with enrollments for end-user products (the Enterprise Enrollment), for server and cloud products (the Server and Cloud Enrollment, which requires full Software Assurance or subscription coverage of each committed product family) and for subscriptions.[14] Additional deployments are reported once a year in a True-up, “an annual inventory of products, services, users, and devices added during the year”, and an Update Statement is required even if nothing changed.[15]

The Microsoft Customer Agreement (MCA) is a short, online agreement that, unlike the EA, does not expire; all Microsoft cloud products are available through it, bought directly from Microsoft or through a partner.[16] In the Cloud Solution Provider program partners sell and bill Microsoft cloud services; since 1 September 2024 license-based subscriptions are sold on the new commerce platform with monthly, annual or three-year terms.[17] Smaller programs include the Microsoft Products and Services Agreement and Open Value. Program comparison, pricing levels, renewal and cancellation rules are in Microsoft volume licensing programs.

Software Assurance

Software Assurance (SA) is Microsoft’s maintenance offering for perpetual licenses. Its first benefit is New Version Rights: the customer “may upgrade to the latest version of an available Product”.[13] The Software Assurance Benefits page lists further benefits by product pool, among them Windows VDA, disaster recovery rights, License Mobility through Software Assurance and Self Hosting, and states that access to the benefits “generally expires upon expiration of their SA coverage”.[13] Several core rights described above also depend on SA or subscription status: licensing SQL Server and Windows Server by individual virtual machine, SQL Server unlimited virtualization and fail-over, Azure Hybrid Benefit, and the Flexible Virtualization Benefit.[6][7][8]

Subscription licenses increasingly carry the same rights. On 1 April 2026 Microsoft gave MCA subscription customers for Windows Server and SQL Server rights equivalent to Software Assurance, and on 1 May 2026 it updated the terms “to support the launch of Software Assurance in the Microsoft Customer Agreement”.[19]

Audits and compliance

Microsoft’s agreements contain a verification clause. In the Microsoft Customer Agreement the customer “must keep records relating to Products it and its Affiliates use or distribute”, and Microsoft may, at its own expense, “verify Customer’s and its Affiliates’ compliance with this Agreement at any time upon 30 days’ notice”, using an independent auditor under nondisclosure obligations.[20] If verification reveals unlicensed use, the customer must order sufficient licenses within 30 days; if unlicensed use is 5% or more of total use, the customer must also reimburse Microsoft’s verification costs and buy the missing licenses at 125% of the then-current price.[20] The EA and other program agreements contain their own verification terms, which are set in each signed agreement.

Microsoft distinguishes these verifications from Software Asset Management (SAM) engagements. According to Microsoft’s SAM program FAQ, a SAM engagement is delivered by a Microsoft partner and produces a snapshot of deployment and usage data, a license optimization analysis and recommendations; the FAQ answers the question whether an engagement is an audit with “No, a Microsoft SAM engagement is not audit”, and describes it as recommended but not required.[21] Commentary: because the data gathered in a SAM engagement is a deployment inventory matched against entitlements, organizations commonly prepare for it with the same effective license position work as for a formal verification. For the general practice see Software license audit and True-up.

Virtualization and third-party clouds

Outside Azure, the default is restrictive: “Customer is not permitted to use or access software on devices that are under the management or control of a third party” except as the Product Terms permit.[1] Since 1 October 2019 Microsoft has treated Alibaba, Amazon, Google and Microsoft as Listed Providers, and “on-premises licenses purchased without Software Assurance and mobility rights cannot be deployed with dedicated hosted cloud services offered by Listed Providers.”[18] Other hosters are Authorized Outsourcers, on whose shared servers customers with subscription licenses or active SA may deploy under the Flexible Virtualization Benefit.[1]

On Listed Provider infrastructure the main route is License Mobility through Software Assurance, which requires a verification form with each partner and prevents moving licenses back within 90 days; it covers SQL Server and several other servers, but Windows Server core licenses are not License Mobility designated.[13][6] A named exception allows eligible Microsoft 365 users to run Microsoft 365 Apps in Amazon WorkSpaces.[22] The full rule set is in Microsoft licensing on third-party clouds, and the competition complaints these rules prompted are in Microsoft cloud licensing complaints.

Recent changes

The Product Terms are republished regularly, and the Summary of Changes lists the updates of the previous twelve months.[19] Changes of note in 2026 include:

Date Change 
2026-04-01 MCA subscription terms for Windows Server and SQL Server consolidated; subscription customers receive rights equivalent to Software Assurance 
2026-05-01 Software Assurance launched in the Microsoft Customer Agreement; Microsoft 365 E7 launched 
2026-06-15 300-license cap extended to Microsoft 365 Apps for business and Microsoft Teams Essentials 
2026-07-01 Microsoft 365 E3/A3/G3 Unattended License added to the Amazon WorkSpaces eligible products 
2026-08-01 Windows Server Extended Security Update terms updated for Azure and Azure Arc scenarios; G3 and G5 added as Copilot prerequisites 
2026-09-01 New Product Terms for Azure Virtual Desktop Hybrid on customer-owned or Authorized Outsourcer infrastructure 
2026-09-15 Security and Compliance terms reorganized into Defender, Entra and Purview product-family pages, with no change to use rights 

All rows are from the Summary of Changes.[19]

Guides

Detailed articles on Microsoft licensing in this wiki:

Archived guides and white papers, kept as sources alongside the articles above:

Litigation involving Microsoft is listed on the vendor page, including United States v. Microsoft Corp., Microsoft Corp. v Commission, Ranks and Vasiļevičs and JJH Enterprises v Microsoft.

Out of scope

This overview does not cover list prices, customer-specific discounts, the Services Provider License Agreement (SPLA) and its use rights, OEM and retail license terms beyond passing mention, education and nonprofit programs, GitHub offerings, or Microsoft hardware. Detailed counting rules are in the linked product articles.

References

  1. Microsoft Product Terms: Universal License Terms, For all Software (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-30.
  2. Microsoft Product Terms: Universal License Terms, For Online ServicesEffective 2026-09-15. Retrieved 2026-09-30.
  3. Microsoft Product Terms: Microsoft 365 (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-26.
  4. Microsoft Product Terms: CAL and ML Equivalency LicensesRetrieved 2026-08-31.
  5. Microsoft Product Terms: Windows Desktop Operating System (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-30.
  6. Microsoft Product Terms: Windows Server Standard, Datacenter, and Essentials (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-30.
  7. Microsoft Product Terms: SQL Server (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-30.
  8. Microsoft Product Terms: Microsoft Azure (all programs)Effective 2026-09-15. Retrieved 2026-09-30.
  9. Microsoft Product Terms: Microsoft Dynamics 365 Services (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-30.
  10. Power Platform Licensing Guide, October 2026 (PDF)Effective 2026-10-01. Retrieved 2026-10-02.
  11. License options for Microsoft Copilot (Microsoft Learn)Effective 2026-09-17. Retrieved 2026-09-26.
  12. Microsoft Product Terms: Visual Studio Subscriptions (EA/EAS)Effective 2026-09-15. Retrieved 2026-09-26.
  13. Microsoft Product Terms: Software Assurance BenefitsEffective 2026-09-15. Retrieved 2026-09-30.
  14. Enterprise Agreement Program Guide (PDF)Retrieved 2026-09-26.
  15. Optimizing your licensing position with the True-up process (PDF)Retrieved 2026-09-26.
  16. Microsoft Customer Agreement (Microsoft Licensing)Retrieved 2026-09-26.
  17. New commerce experience for license-based services (Partner Center, Microsoft Learn)Effective 2025-08-12. Retrieved 2026-09-26.
  18. Listed Providers (Microsoft Licensing Resources and Documents)Effective 2019-10-01. Retrieved 2026-09-30.
  19. Microsoft Product Terms: Summary of ChangesEffective 2026-09-15. Retrieved 2026-09-30.
  20. Microsoft Customer Agreement, sample for the United States, March 2023 (DOCX)Linked from the Microsoft Customer Agreement Samples pageEffective 2023-03-01. Retrieved 2026-09-30.
  21. Microsoft SAM Program Frequently Asked Questions (PDF)Effective 2016-10-01. Retrieved 2026-09-30.
  22. Microsoft Product Terms: Amazon Workspaces DeploymentsEffective 2026-09-15. Retrieved 2026-09-26.

See also

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