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Microsoft 365 Enterprise Update August 2026

MVP Tom Arbuthnot shares all the latest Microsoft Teams and Copilot news and announcements in less than 15 minutes for August 2026

Microsoft 365 Enterprise Update August 2026

Microsoft closed out FY26 with 30 million Copilot seats and Azure up 43% - and, more quietly, OpenAI became a subprocessor in Microsoft 365, with the toggle auto-enabled unless you'd already said no. Also inside: retirement dates for SMS and voice MFA, eight Copilot updates, five Teams updates, and a new certification programme for Teams Phone voice agents.

Full deck: https://empoweringcloud.sharepoint.com/:p:/s/ECContent/IQCvrmx40qXVQ5rB9e6zG5qYASgVguvGThT-YGnueTKTtXE?e=q2hixl

Thanks to This Month's Benefactor - Landis

Huge thanks to Landis, this month's benefactor, for all their support to the community. They're doing a lot of development in their contact centre and attendant console, with plenty of AI capability landing too - the What's New in Landis Contact Center: July 2026 post covers batch user management (apply settings templates to whole Entra groups at once), chat webhooks to extend your voice automations to chat, and a CDN-delivered chat widget for faster loads outside the US.

We'll also soon be running a unified contact centre face-off - a live community event with experts from the top vendors demoing their solutions and making their case. Look out for that.

Fresh on Empowering.Cloud

On the Teams Insider Podcast

All episodes are on the Teams Insider podcast.

  • Microsoft Places Updates Explained - with Martin Boam, Microsoft. Desk booking, room booking and where AI fits. Listen · YouTube
  • Dynamics 365 Contact Center Explained - with Alpana Bajaj, Product Lead, Microsoft. A great walk through where D365 Contact Center sits. Listen · YouTube
  • Why Microsoft Is Quietly Winning with Enterprise AI - with Rishi Kumar, Logitech. A really interesting take on Microsoft's enterprise AI position. Listen · YouTube

OpenAI Is Now a Subprocessor in Microsoft 365 - and It Auto-Enabled

The biggest story of the month for anyone responsible for a tenant. OpenAI-operated models (from GPT-5.6) now run under OpenAI as a subprocessor in Microsoft 365 Copilot, and the admin toggle auto-enabled on 24 July unless it was already set to "No users" - details in MC1422074.

If you have any considerations around where and how your data is processed - particularly the EU Data Boundary, where the wording is now "except as otherwise disclosed" - go and check that toggle today. The pattern to watch here: defaults doing the work.

Microsoft's FY26 Year-End - 30 Million Copilot Seats

The FY26 Q4 earnings gave us a new Copilot number:

  • 30M+ paid Microsoft 365 Copilot seats, with net adds more than doubling quarter over quarter
  • Customers with 50,000+ seats up over 7x year over year - the big enterprise deals are landing
  • Weekly engagement "on par with Outlook and Teams" (Microsoft's phrasing)
  • Azure cloud revenue up 43% · Agent 365 at nearly 40M registered agents · GitHub Copilot at 50M users

Still a long way to the 450 million M365 users - most of whom have the included Copilot Chat tier - so plenty of headroom for Microsoft to upsell. The market responded strongly to the trajectory.

The Copilot "Super App" - Confirmed for This Quarter

Further confirmation at the earnings call: Copilot Chat, Cowork and GitHub Copilot - "including Code" - are merging into one app, spanning consumer and commercial, "this quarter". It's the same trajectory as the other frontier labs: Anthropic brought Claude Code into the Claude app, and OpenAI merged Codex and ChatGPT into GPT Work - which, confusing name aside, uses "Work" the way Microsoft and Anthropic use Cowork. OpenAI says that move took them to 10 million people using their agents. Whoever owns the front door owns the workflow - I'm genuinely looking forward to this one.

Nadella Makes the Microsoft AI Strategy Explicit

Satya Nadella spelt out the strategy - "Frontier Diffusion & Control": Microsoft as a multi-model environment, offering frontier models, their own MAI models and open-weight models through AI Foundry, separating which model you choose from which harness you use. Copilot is the harness; the models are interchangeable.

Microsoft also co-signed the NVIDIA-led open-weights letter on day one - from 25 signatories to 230+, with OpenAI and Google joining within a day. The interesting bit: Anthropic is the only major lab that didn't sign.

New Microsoft AI Models, Including a Security Model

MAI-Image-2.5-Pro and MAI-Voice-2-Flash landed with the cost argument front and centre - Microsoft's own numbers claim up to 84% cheaper in PowerPoint versus GPT-Image-2. And MAI-Cyber-1-Flash is Microsoft's first purpose-built security model - exactly the high-volume, latency-sensitive scenario where owning the model pays off. Expect these to be routed into Copilot and GitHub Copilot wherever the cost-to-performance case makes sense.

Microsoft and Mistral: the Sovereignty Play

Microsoft is putting billions into Mistral compute in Europe, framed squarely on sovereignty and regulated industries. It continues the EU Data Boundary conversation - not just where the model is hosted, but which model it is. Mistral is the biggest play for an EU-born frontier-level model, and this looks like the right defensive move.

Entra: Passkeys Default, SMS and Voice MFA Retiring

Planning-cycle item, not FYI:

  • Passkeys become the default from 1 September 2026 (auto-enabled for SMS/voice users)
  • Approved telecom providers land in the Microsoft Security Store from 30 October 2026 - the route if you have business reasons to keep SMS/voice
  • Microsoft-provided SMS and voice MFA retires 1 February 2027

Six months sounds like a long time; for a large estate with SMS stragglers it isn't. Details in MC1426371 and MC1440968.

8 Microsoft 365 Copilot Updates

  • Claude Opus 5 in Copilot - following Sonnet 5 last month; reviews are strong, if a little token-hungry. Enable Anthropic models per user/group in the admin centre. (techcommunity post)
  • ⚠️ Your Copilot spending alerts got wiped - a Cost Management update cleared existing alerts; recreate them in each spending policy. (MC1435850)
  • Computer Use comes to Cowork - moved from Frontier's Researcher (retired 1 July) into Cowork, and with it onto consumption billing. (MC1420902)
  • M365 Admin agent GA - manage users, licences, service health and troubleshooting natively in the admin centre; confirms before write actions and respects RBAC. I'll do a video on how good it actually is. (MC1436831)
  • PowerPoint Copilot skills as SKILL.md in OneDrive - the agent-skills pattern arriving in Office, with skills saved and shareable from OneDrive. (MC1434580)
  • Notebooks in the Copilot app - rolling out early to mid August, with OneNote sync; the existing OneNote experience is unchanged. (MC1420901)
  • Copilot mobile records in-person meetings - on by default; audio to the user's OneDrive with transcript and insights, inheriting OneDrive permissions and Purview governance. Disable org-wide via Intune App Configuration Policy if needed. (MC1437679)
  • AI meeting archives (.meeting) - an AI-generated summary file for every eligible meeting, stored in tenant-owned SharePoint Embedded, not user-accessible, default five-year retention. Review the retention default before it lands in September. (MC1429018)

All the AI Frontier Labs Want to Be in Your Office Apps

Enterprise is where the AI business value is, and everyone has worked it out. Anthropic consolidated to a single Claude for Microsoft 365 add-in, and their M365 connector gained write tools - email, calendar, SharePoint files. Grok now has add-ins for Word, PowerPoint and Excel, and OpenAI has Office plugins too - all via official AppSource listings.

The line worth noticing: reading your mail is one thing, sending it is another. Make sure your governance, compliance, and app controls align with what your users can actually install.

Teams Phone Voice Agents Get a Certification Programme

The Teams Voice Agent integration docs are published - third-party voice agents that answer, authenticate, capture intent and hand off with context preserved, under a supported integration model rather than bespoke builds. A Certification Program is "coming soon", and AudioCodes with Voca CIC are the first - currently only - listed provider. Congratulations to them; I understand more are coming.

I've just recorded a podcast with Gidi at AudioCodes going through what's native in Teams Phone voice agents versus what the certified ecosystem partners bring - out soon.

Facilitator Answers the Questions Nobody Else Can

If a factual question goes unanswered in a meeting, Facilitator (with permission) runs a web search and posts an answer to the meeting chat. This requires Copilot Premium, must be manually added, and is designed to trigger less than once per meeting. Rolling out in September, pushed from August. (MC1409304)

We've had it in a few of our internal meetings - some people love it, some are unsure. I'm excited to see Facilitator move from note-taker to active participant.

5 Microsoft Teams Updates

  • Test mic & speaker before you join - one button on the pre-join screen: record a clip, play it back. Live worldwide; GCC/GCC High/DoD completes early August. (MC1288530)
  • Join-by-code needs owner approval - for private teams, code joins now queue for owner approval; public teams unaffected. Rolling out late August to late September, on by default - tell your team owners. (MC1437678)
  • Consent notifications reach 1:1 calls - recording/transcription consent extends beyond meetings to 1:1 calls (desktop/web first), GA mid-August; existing policy config applies. (MC1426709)
  • ⚠️ Federated chat gets stricter controls - External Access Restrictions live since 31 July, Mutual Federation on 30 September, both off by default. Enforcement can remove users from existing federated chats - understand the impact before enabling. (MC1423114)
  • Passwordless Rooms resource accounts - the Rooms Pro portal migration to passwordless Entra resource accounts rolls out through August. There's some lift: identify eligible accounts, schedule and execute migrations - but a long-standing weak point closed. (MC1435786)

Upcoming Events

We're taking an events break in August, back with a strong September:

In person: Ribbon Insights 2026 on 7 September (I'm speaking - Who is going to profit from Agents?), CollabDays Bletchley Park on 23 September, and UCX London on 14 October - Martin Boam and I will be talking about what's new in Copilot and Microsoft Teams, and we'll be running a private end-user roundtable there too. If you're interested in joining, get in touch.

Many thanks again to Landis, this month's benefactor - see you next month.

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