Microsoft limits Copilot Chat usage for users without paid licences

Microsoft recommends that admins inform their help desk staff and review licence request settings

Microsoft has started limiting some Copilot features for users without Microsoft 365 Copilot licences, with yesterday marking the start of these limits for larger organisations.

Microsoft started applying the limits to organisations with 2,000 or fewer Microsoft 365 seats on 2 November and as of yesterday organisations with more than 2,000 seats are covered.

Microsoft calls these “fair use” limits for Copilot Chat features and capabilities, although this isn’t fair use in the sense of copyright law. Chat will still be included in Microsoft 365 subscriptions, and IT teams do not have to take any administrative action as part of the change.

However, Microsoft sets and manages the limits, and administrators cannot view or adjust them. Microsoft doesn’t publish specific thresholds because they can vary throughout the day and may change as the Copilot AI assistant evolves, so UK enterprises will find it hard to predict how many staff will hit a ceiling, or when.

“Microsoft recommends that admins inform their help desk staff and review license request settings,” the vendor said in the online post.

AI economics

The change comes as Microsoft adjusts its policies amid evolving AI pricing and economics. Microsoft has also told channel partners to expect usage-based billing (UBB) to be on by default for new Microsoft 365 Copilot Business subscriptions bought through Cloud Solution Provider partners sometime between January and March 2027, Microsoft’s third fiscal quarter. UK organisations that buy through a CSP may want to factor that into their budgets.

For IT leaders, the main challenge is predictability. Without visibility into who is approaching a limit, it is harder to plan for days when staff engage in more intensive Copilot use, or to anticipate how many licence requests will follow.

What IT leaders need to know

Users reaching Copilot Chat limits might receive a message about Microsoft 365 Copilot, Microsoft 365 Copilot Business for small and medium businesses and other Copilot capabilities they can upgrade to, according to Microsoft’s online post. Enterprises should expect those prompts to generate licence requests from staff and decide in advance how to handle them.

Microsoft says reaching a limit “might indicate interest in additional Copilot capabilities”, and its guidance to partners treats those users as candidates for Microsoft 365 Copilot. IT leaders may want to use their own usage data to prioritise licences for the heaviest users, and to set expectations with everyone else about what the included Copilot Chat offering covers.

However, Microsoft 365 Copilot licences also include fair use limits, according to Microsoft. Copilot’s user subscription licence (USL) covers everyday AI tasks. “We're setting usage limits so that the vast majority of people never reach a limit,” Microsoft Corporate Vice President Nicole Herskowitz said in an online post in September.

Some Copilot Chat users are already used to “fair use” limits, which are already in place for image generation and other features, according to Microsoft.

The in-product user message will also tell users when the limited features will become available again. Copilot Chat responses already in progress aren’t interrupted when a limit is hit, according to the vendor.

The limit notification in most organisations will include an option to upgrade. Users can click that option to request a Microsoft 365 Copilot licence from administrators. Admins can then approve or deny requests through the Microsoft 365 admin centre.

Organisations can also allow users to buy licences directly through that limit-reached notification. Administrators can turn off direct purchases for each product.

These limits should be hitting users without Microsoft 365 Copilot licences in commercial tenants who use Copilot Chat on the web, desktop and through mobile applications, according to Microsoft.

Microsoft’s AI Business Solutions & Security Partner Experience (ASPX) also shows resellers which of their customers have users reaching Copilot usage limits. UK enterprises that buy through a reseller or distributor should be aware that their partner may see those signals before internal admins do and may approach them about upgrading.

Microsoft executives have said publicly that the future of AI pricing is a basic allotment of compute under a license with metered consumption charges for more advanced uses of AI.

During Microsoft’s latest quarterly earnings call, CEO Satya Nadella touted the vendor’s growing consumption-based AI business, revealing that the number of Copilot customers actively consuming credits through usage-based billing grew more than 75 percent over the quarter.

Credit consumption from agentic features on Microsoft’s GitHub business, which already uses usage-based billing, has more than doubled. Consumption plus seat subscriptions increase Microsoft’s total addressable market and average revenue per user, Nadella said on the call.

“As agents take on higher-value work, consumption opens up business-funded demand, with spending tied directly to the value these agents deliver,” Nadella said.

Nadella does not want customers “tokenmaxxing,” and he feels “very good about the progress” in educating customers.

“We’re trying to make sure that customers understand both options [and] they’re able to use the two options in the optimal way that benefits them,” the CEO said. “We don’t want them to overbuy one thing and then feel like they’re ‘tokenmaxxing’ because that doesn’t serve anybody’s purpose. We want to make sure that they understand the value of the subscription and how it’s a continually improving value. It’s not even static. And at the same time, you can exercise this consumption meter.”

Copilot Chat Vs. Microsoft 365 Copilot

All Microsoft business users have access to Copilot Chat. Without a paid Microsoft 365 Copilot licence, users still receive AI model access, web-grounded reasoning, limited work-data reasoning through Work IQ, limited agent access and enterprise-grade security, according to Microsoft.

Adding a Microsoft 365 Copilot licence gives users priority AI model access and full Work IQ data reasoning, leveraging meetings, emails, chats, files and more.

Other licensed capabilities include extensive access to Researcher, Analyst, custom agents and other advanced AI agents plus included Copilot Studio access, according to Microsoft.

Accounts with the label M365 Copilot (Premium) have Copilot add-on licences. Copilot Chat (Basic) and M365 Copilot (Basic) labels mean the account doesn’t have an add-on licence.

This article first appeared on Computing sister title CRN