Making Sense of Microsoft's FY26 Changes

Last week, we hosted the Voice of the Microsoft Partner to break down what’s actually changing in FY26. Between shifting incentive structures, new Copilot plays, and a major push toward AI adoption, the updates are already affecting how partners build their GTM, prioritize their solutions, and engage with Microsoft sellers. If you couldn’t make it live, here’s what you missed and what it means for your Microsoft strategy moving forward.

AI Agents Are Front and Center

Microsoft’s messaging is clear: FY26 is the year of agents. While FY25 emphasized Copilot and AI assistants that support human workflows, this year’s focus shifts toward agent-led process automation. These aren’t just chat tools. Agents are AI-powered processes built with knowledge bases, workflows, and integrations across Microsoft 365, Power Platform, and customer data sources.

Microsoft expects partners to lead this shift by not only implementing agents for clients but also offering AI-focused managed services. They’ve laid out a three-stage maturity model, moving from assistant-led tasks to agent-controlled operations. Partners who can productize agent solutions for industry-specific needs will be well-positioned for success. And yes, there are already Microsoft-funded templates available to jumpstart these efforts.

FY26 Funding Structure Simplified

One of the biggest shifts in FY26 is the consolidation of Azure incentives into the new Azure Accelerate program. This replaces previously fragmented funding across various Azure solution areas. Now, whether you're working on SAP migrations, VMware, data platform modernization, or AI-powered app development, the path to funding is streamlined and the focus is clear: fewer things, bigger deals.

Incentives: What’s New and What’s Gone

Incentives have moved from being quantity-driven to quality-focused. Microsoft has introduced performance measurement frameworks that prioritize impact over volume. Workshops, envisioning sessions, and outcomes-based engagements are being emphasized over repetitive, low-value engagements. Partners will need to demonstrate customer impact to qualify for top-tier funding and rebates.

Also noteworthy: Direct bill partners now need $1M in revenue and an SPD in a solution area to remain eligible. Indirect partners have a more attainable bar, 25 points and $25K in TTM revenue, which opens doors to incentives and recognition. However, partners are encouraged not to stop at the minimum. SPDs and specializations unlock the most valuable benefits, including IURs and access to funding programs like Azure Accelerate.

Modern Work: Bundling is Key

Copilot alone is no longer enough. Microsoft wants to see Copilot bundled with Power Platform capabilities to deliver true AI + automation workflows. These solutions should enable end-to-end business outcomes, not just user productivity. Workshops and deployment accelerators should now include a combined Copilot + Power Platform narrative.

Security: Designation-Only Bar Removed

Security incentives have been opened up significantly. While previously locked behind specializations, FY26 now allows designated partners to access security funding. Microsoft wants partners to deliver business-outcome-focused assessments before deployment. Think workshops and strategic consulting, not just implementation. These services can now be funded, especially if tied to migration from third-party security stacks to Microsoft solutions.

Biz Apps: From Demos to Transformation

The business applications funding strategy is also evolving. FY25 focused on tailored demos and product showcases. FY26 now centers on strategy-led engagements, including envisioning workshops for ERP/CRM and business transformation briefings. Microsoft expects partners to invest in pre-sales consulting and industry-aligned use cases to unlock these incentives.

Incentive Payouts Are Changing

Incentives for July–September will be recalculated under FY26 rules in February. This means if you qualify under the new thresholds (e.g., 25 points + $25K TTM), you could receive additional incentive payouts retroactively, a major opportunity for partners who act early.

Final Takeaway for Microsoft's FY26 Changes

Microsoft has made its priorities clear: scale agent-based services, lead with business outcomes, and bundle AI with automation. Incentives and funding are aligned to reward those who do. Now is the time to evaluate your GTM strategy, assess your eligibility under the new frameworks, and build service offerings that align with Microsoft’s FY26 direction.

If you'd like the slides or need help translating these changes into action, reach out to the team directly, we're here to help.

Register for future sessions here.

Check out the full recording here:

Check out the highlights here: