Microsoft’s January and February 2026 Product Terms updates introduce several changes across Microsoft 365, Azure, Microsoft Power Platform, and Microsoft Defender services. Many of these updates reflect Microsoft’s continued focus on AI integration, security tooling, and expanding Copilot-related services.

Below we highlight the most relevant updates and what they may mean for organisations managing Microsoft licensing and cloud deployments.

Summary of Key Updates

• Security Copilot: Now included within Microsoft 365 E5 subscriptions alongside a monthly allocation of Security Compute Units.
• Azure AI: Azure AI Foundry rebranded as Microsoft Foundry, with updated licensing terms for Azure Direct Models.
• Power Platform: Copilot Studio grounding terms aligned with Microsoft 365 Copilot Data Query Terms.
• Dragon Copilot: New licensing availability and deployment clarification for healthcare environments.
• Defender Experts: New Microsoft Defender Expert Suite launch reflected in updated licensing tables and purchasing requirements.
• Audio Services: New clauses clarify the role of carriers in provisioning and managing phone numbers.

Security Copilot Included with Microsoft 365 E5

Microsoft has updated the Product Terms to state that Security Copilot is now included within Microsoft 365 E5 subscriptions.

The update introduces a clause stating that Microsoft 365 E5 provides:

• Access to Microsoft Security Copilot
• A monthly allocation of Security Compute Units (SCUs) per eligible subscription to operate the service

Security Copilot can integrate with several Microsoft security services and data sources, including:

• Microsoft Defender
• Microsoft Entra
• Microsoft Intune
• Microsoft Purview

In addition to the base entitlement, Microsoft also provides Security Copilot agent capabilities, which allow organisations to automate specific security workflows across these services.

These agent capabilities can be used to support activities such as:

• security incident investigation
• policy analysis
• identity and endpoint security insights
• data protection and compliance monitoring

Additional compute capacity or expanded automation scenarios may require further Security Copilot consumption.

Why it matters:

This update clarifies that Security Copilot capabilities are now available to organisations already licensed for Microsoft 365 E5, alongside a defined allocation of Security Compute Units.

For organisations running E5 security tooling such as Defender, Entra, Intune, and Purview, this change may enable Security Copilot functionality without requiring a separate base licence, although usage remains dependent on available compute capacity.

As Microsoft continues to evolve its AI and security licensing models, organisations should review how these entitlements interact with existing security services and automation capabilities.

Microsoft Foundry: Azure AI Foundry Rebranding

Microsoft has updated the Universal Terms for Online Services, Privacy and Security Terms, Microsoft Azure Terms, and the Glossary to reflect a rebranding of Azure AI Foundry to Microsoft Foundry.

Alongside the name change, Microsoft has clarified licensing terms for open license AI models delivered as Azure Direct Models.

Why it matters:

Microsoft continues to consolidate its AI offerings under broader platforms and branding. For organisations using Azure AI services, these changes may affect how services appear in documentation, contracts, and licensing discussions.

Microsoft Power Platform: Copilot Studio Grounding Terms

Microsoft updated the Grounding with Bing Terms for Microsoft Copilot Studio to align with the Microsoft 365 Copilot Data Query Terms.

These updated terms were originally published in English on 1 February 2026, with translations released on 9 February 2026.

Why it matters:

Grounding enables Copilot agents to query external data sources. Aligning these terms across Copilot products suggests Microsoft is standardising governance rules for how AI services access and process external information.

The Microsoft 365 Copilot Data Query Terms also include protections that treat customer query data as confidential information, helping ensure that prompts and query results are not used to train Microsoft foundation models.

Organisations deploying Copilot agents should review these updated terms to ensure they align with internal data governance policies.

Dragon Copilot Licensing Updates

Microsoft has introduced a new licensing entry for Dragon Copilot Physician Practice Per User within the MCA Availability Table.

The Product Terms also introduce a deployment restriction stating that customers may not deploy Dragon Copilot Physician Practice Per User licenses in the same tenant as other Dragon Copilot licenses.

Why it matters:

Dragon Copilot is positioned as Microsoft’s AI offering for healthcare professionals. Organisations deploying Dragon Copilot should ensure that their environments align with the updated tenant deployment requirements.Defender Expert Suite Launch Reflected in Terms

Microsoft has updated the Product Terms to support the launch of the Microsoft Defender Expert Suite.

Changes include:

• Updates to the Availability Table
• Updates to the License Prerequisite Table
• Introduction of new purchasing minimum requirements
• A new promotional offer

Why it matters:

Microsoft continues to expand its managed security services portfolio. Organisations evaluating security operations outsourcing or managed detection services should review these updated terms and eligibility requirements.

Audio Services: Open Phone System Platform Terms

Microsoft has added new clauses relating to the Open Phone System Platform and Number Management.

These terms clarify that authorised carriers can provision, add, or remove telephone numbers, and that Microsoft does not control these actions.

Why it matters:

For organisations relying on Microsoft’s telephony ecosystem, this clarification reinforces that number management responsibilities ultimately sit with authorised telecom carriers rather than Microsoft.

Microsoft 365 Licensing Table Updates

Microsoft also updated the MCA Availability Table and License Prerequisite Table to include:

• Microsoft Defender for Endpoint P2 Add-On for Microsoft 365 E3
• Microsoft Entra ID P2 Add-On for Microsoft 365 E3.

Why it matters:

These updates clarify licensing paths for organisations looking to extend security and identity capabilities within Microsoft 365 environments without moving fully to E5 licensing tiers.

Final Thoughts

Microsoft’s early 2026 Product Terms updates reinforce several ongoing themes in Microsoft’s strategy:

• Continued integration of AI capabilities across core licensing tiers
• Ongoing consolidation and rebranding of AI platforms
• Expansion of security and managed defence services
• Increasing standardisation of Copilot governance and grounding rules

While some of these changes appear administrative, they may have meaningful implications for licensing strategy, AI adoption, and security architecture planning.

How ITAA Can Help

Microsoft’s Product Terms evolve frequently and interpreting their implications can be complex.

At ITAA, our consultants specialise in translating licensing updates into practical guidance, helping organisations understand how changes affect their agreements, deployments, and renewal strategies.

Need clarity?

Contact our team to understand how these updates may affect your Microsoft estate and how to turn them into a strategic advantage.

Lucy Baker, Senior Microsoft Consultant

Lucy Baker is a Senior Microsoft Licensing and IT Asset Management Consultant with extensive expertise in license risk remediation, optimisation, and audit defence. Known for delivering tailored, customer-focused solutions, Lucy specialises in Microsoft 365 optimisation, contract negotiation, and ITAM strategy, helping organisations navigate complex licensing environments with innovative thinking and precision.