Quick Answer
Microsoft 365 E5 is Microsoft's penultimate security, compliance, and analytics tier, second only to E7. It bundles Defender XDR, Entra ID P2, the full Microsoft Purview compliance suite, Power BI Pro, and Teams Phone at $60/user/month (as of the July 2026 pricing update). For organizations that are either paying for some (or all) of those tools separately, or operating in a regulated industry that needs Purview's deeper compliance features, E5 tends to be worth it; for others, E3 may be a more cost-effective starting point.
Key Takeaways
- Microsoft 365 E5 includes everything in E3, plus Defender XDR, Entra ID P2, the full Microsoft Purview compliance suite, Power BI Pro, and Teams Phone.
- As of the July 2026 price update, E5 costs $60/user/month, up from $57.
- E5 Security and E5 Compliance are also sold as standalone add-ons for organizations on lower tiers that only need some of E5's capabilities; however, managing an ad-hoc deployment like this is less cost-effective than just switching to a full E5 deployment.
- Regulated industries (healthcare, finance, legal, government) tend to need E5's Purview features more often regardless of company size, necessitating either the add-on or a full E5 license.
Deciding whether your organization needs Microsoft 365 E5 shouldn't boil down to assuming that as the more expensive option, it must be better. E5 is a robust security and compliance suite, to be sure, but it's also one of Microsoft's pricier tiers, and much of what it includes only pays off if your team is using it on a day-to-day basis.
Here's what's in E5 and how to tell whether your business needs it or would have its needs met with a less expensive tier.
What Is Microsoft 365 E5?
Microsoft 365 E5 is Microsoft's offering to businesses that care strongly about compliance, security, and analytics but aren’t ready to make the plunge into agentic AI. It includes everything in Microsoft 365 E3 (e.g., unlimited users, Windows Enterprise licensing, Defender for Office 365 Plan 1, and Intune Plan 2) with a considerably deeper security, compliance, and analytics stack on top.
What's Included in Microsoft 365 E5?
Security
E5 includes the full Defender XDR platform, unifying all of the following cybersecurity tools in one console:
- Defender for Endpoint Plan 2 (EDR with threat hunting and automated investigation)
- Defender for Office 365 Plan 2 (anti-phishing, safe attachments and links, and attack simulation training)
- Defender for Identity (Active Directory protection and lateral movement detection)
- Defender for Cloud Apps (CASB and shadow IT discovery)
- Entra ID P2 (Privileged Identity Management/PIM and risk-based conditional access)
Compliance
E5 really justifies its price difference here. It boasts the full Microsoft Purview suite, including Premium eDiscovery, Advanced Audit, Communication Compliance, Insider Risk Management, and Information Protection with automatic sensitivity labeling.
While E3 customers can buy the standalone Purview add-on, coming native with E5 can be more cost-effective.
Analytics & Voice
E5 also includes Power BI Pro and Teams Phone (Phone System), both of which many organizations already buy separately for at least some of their workers.
Microsoft 365 E5 Pricing
As of the July 2026 price update to the Microsoft suite, Microsoft 365 E5 costs $60/user/month (formerly $57).
If you don’t need everything in the E5 platform, Microsoft offers two standalone add-ons for organizations on lower tiers:
- E5 Security includes the Defender suite and Entra ID P2
- E5 Compliance includes Purview's DLP, Insider Risk Management, Communication Compliance, and eDiscovery
Naturally, neither option includes the features in the other. So, if your organization only cares about one of them (say, you are in an industry where compliance matters quite a bit but have cybersecurity handled elsewhere), then this split can work. However, if you do need both, the à la carte path will be more expensive than just deploying a full E5 license.
Who Should Use Microsoft 365 E5?
If some (or all) of the following are true, consider a Microsoft 365 E5 license:
- You're already buying several of its components separately. If your team is paying for things like Defender, Entra ID P2, Purview add-ons, or Power BI Pro in addition to your E3 license, the E5 bundle can often simply be cheaper.
- You're in a regulated industry. Healthcare, finance, legal, and government organizations frequently need things like Insider Risk Management or Communication Compliance. You can buy the standalone Purview suite, of course, but if you need anything else in addition to the above, E5 may be more cost-effective.
- Your security team wants a single view. Defender XDR consolidates endpoint, identity, email, and cloud app signals into one console. As with the compliance package, you can get this through the E5 security add-on, but if you want anything else beyond security, a full license may be better.
- You're handling sensitive data. Even outside the aforementioned regulated industries, organizations managing significant sensitive customer or financial data tend to see very real value using E5's data governance tools. If you don’t want your audit answer to be “it’s in a shared spreadsheet,” E5 can help.
Not every organization on E3 needs to move to E5, though. If your team isn't going to configure and get meaningful use out of features like Insider Risk Management, Advanced eDiscovery, or Privileged Identity Management, you're paying for capabilities you aren’t using and maybe don’t need.
However, Microsoft does support mixed-license usage for teams, which offers more flexibility. A pattern that tends to work well while saving some money is using E5 for security operations, compliance officers, and anyone handling sensitive data, while using E3 for everyone else. This can also be a great way to roll out E5 across an organization in waves over a longer span of time rather than doing an “everybody all at once” switch.
Microsoft 365 E5 vs. E7: Do You Need Agentic AI?
What we’ve discussed thus far is whether E5 makes sense as an upgrade over E3. But E5 is no longer Microsoft’s most premier package – it introduced E7 in spring of 2026. The Microsoft E5 vs. E7 calculus is different than E5 vs. E3.
E7 is primarily an agentic AI suite; it includes everything in E5 and bundles it with Microsoft 365 Copilot, Agent 365, and the Microsoft Entra Suite, though the price tag reflects that at $99/user/month. E7 is primarily built for organizations moving Copilot from pilot to production, and has little more to offer in terms of security or compliance depth compared to what exists in E5.
If your team hasn't purchased Copilot licenses yet, or you’re still primarily focused on things like compliance and security, E5 is probably more of a right-sized starting point – E7 can be a question left for later.
Want Help Choosing the Right Microsoft 365 Tier?
Between Business Premium, E3, E5, and E7, Microsoft's enterprise licensing has gotten fairly complex. Getting it wrong in either direction can be expensive; on the one hand, you risk overpaying for tools nobody uses, and on the other hand you risk scrambling for a compliance capability you needed six months ago.
IES works with organizations to audit their current Microsoft 365 environment and model out exactly which tier (or mix of tiers) fits their security, compliance, and budget needs. If you're not sure whether your organization actually needs Microsoft 365 E5, contact IES to talk through your options.
Microsoft 365 E5: FAQs
