What is Microsoft Copilot? Complete guide 2026

Microsoft Copilot is Microsoft's AI assistant (artificial intelligence) for Microsoft 365. It helps you write, summarize, analyze, and find information across your Office apps.

The confusion starts with the name. "Copilot" is not a single product, but a shared name Microsoft uses for a whole family of AI tools. Some are free, some cost money, and they serve very different users. So when a colleague says "we got Copilot," the first question is always: which Copilot?

The two that matter most for most businesses are the free Copilot Chat and the paid Microsoft 365 Copilot. That is the difference the rest of this guide is about. If you want to jump straight to the pricing, we have a dedicated breakdown in What does Microsoft 365 Copilot cost?.

Here is an overview of the products that carry the Copilot name and what they cost:

For most businesses, the top three are the relevant ones. The rest are specialist products for developers, security teams, or people building their own AI agents. You will find the full pricing breakdown in What does Microsoft 365 Copilot cost?.

Abbreviations: SMB = small and medium-sized businesses. SCU = Security Compute Unit, the consumption unit Security Copilot is billed in.

Both yes and no, and that is exactly where most people get it wrong.

Copilot Chat is free. It is included in every Microsoft 365 plan, including the frontline plans F1 and F3. It is a web-based AI chat with commercial data protection, so your prompts are not used to train Microsoft's models. But it is built on public web data and has no access to your company data. It cannot read your emails, SharePoint files, or Teams messages.

The full Microsoft 365 Copilot costs money. It is an add-on at $30/user/mo (enterprise) or $21/user/mo for SMBs up to 300 users, and it requires a baseline license from Business Standard and up. In return it can read your data through Microsoft Graph, but only the data each individual user already has rights to.

The short version:

So no, the AI that actually knows your business is not free. But the AI you can test today without paying is. That is a good place to start.

A Copilot agent is AI that does not just answer, but performs tasks for you. Microsoft has three levels, and they are easy to mix up:

Agent Mode brings agentic features directly into Word, Excel, and PowerPoint. The agent can take several steps in a document instead of just answering a single question. It became generally available on April 22, 2026, and is included for everyone with a Microsoft 365 Copilot license.

Copilot Cowork is agentic multi-step automation, where the agent chains tasks together on its own. It became generally available on June 16, 2026. It requires a Copilot license and is billed on consumption through Copilot Credits, so the cost follows usage rather than being a fixed amount.

Agent 365 is the platform itself for managing agents across the organization. It is included in E7 and available as an add-on to E5. It is not available for E3.

In short: Agent Mode works in one document, Copilot Cowork chains tasks together, and Agent 365 manages it all. Abbreviation: GA = General Availability, the point at which a feature is broadly available and no longer in testing.

My recommendation is straightforward: start free, and let real usage decide the rest.

1. Start with Copilot Chat. It is free and already in your plans. Let people use it for a month on general tasks, and see whether it becomes a habit. 2. Measure actual usage. If your knowledge workers are drowning in emails and meetings and genuinely reach for the AI, there is probably value in the full Microsoft 365 Copilot. If they don't, wait. 3. Run a pilot before rolling out broadly. $30/user/mo (or $21 for SMBs) is real money. A pilot group of 5-10 power users quickly shows whether the time saved matches the price.

If you want to see the full Microsoft 365 Copilot and the baseline license requirements, we have gathered it all on our Copilot page. If you are mainly trying to get the most out of the licenses you already pay for, start with our optimizer. It points to where you over- or under-license before you add more spend on top.

Remember: the AI is only as good as the data and permissions it gets access to. If your access controls are already in order, you get far more out of Copilot, and you avoid it surfacing data people should not see.