Microsoft to Unbundle Teams from Office 365 After EU Pressure

Microsoft, the tech giant synonymous with digital productivity, has announced a major pivot in how it packages its software offerings. Following significant scrutiny from the European Commission, the company agreed to unbundle its popular Teams collaboration app from Office 365 and Microsoft 365 subscriptions. This move is a direct response to accusations that Microsoft’s previous bundling practices violated EU competition laws.

Why the EU Pressured Microsoft

The roots of this decision trace back to a formal complaint filed by Slack, a competitor in the collaboration software market, in 2020. Slack alleged that Microsoft’s practice of bundling Teams with its Office suite gave it an unfair advantage, effectively locking out competitors. Such bundling, Slack argued, forced customers to pay for Teams even if they preferred alternative solutions.

The European Commission took these claims seriously, leading to a prolonged investigation into Microsoft’s practices. In May 2025, Microsoft initially proposed changes to how it markets Teams. However, the Commission found these proposals inadequate, prompting Microsoft to return with a revised plan. The new agreement ensures a clearer price differentiation between Office 365 subscriptions with and without Teams and mandates that Microsoft actively promote these separate offerings. These commitments will remain in place for at least seven years.

What This Means for Users and Competitors

For users, the unbundling of Teams could lead to greater flexibility in choosing collaboration tools. Companies that rely on Office 365 but prefer Slack, Zoom, or other alternatives to Teams may now have a more cost-effective option. This could also foster innovation in the collaboration software market, as competitors will no longer face the uphill battle of competing against a pre-installed Microsoft product.

For competitors, this decision represents a significant victory. Slack, now owned by Salesforce, has already expressed satisfaction with the outcome. This move levels the playing field, giving smaller players a better chance to thrive in a market long dominated by Microsoft.

Financial Implications for Microsoft

Despite the regulatory pressure, Microsoft continues to perform robustly in the financial markets. Recent filings reveal strong earnings for the company, with a year-over-year revenue increase of 18.1% for the last quarter. The company reported $76.44 billion in revenue, beating analyst expectations of $73.79 billion. Additionally, its earnings per share (EPS) of $3.65 surpassed the consensus estimate of $3.35.

Analysts remain optimistic about Microsoft’s stock, with many maintaining “buy” or “overweight” ratings. The average price target for Microsoft shares hovers around $612.54, suggesting continued confidence in the company’s growth prospects. However, the decision to unbundle Teams could have long-term financial implications, potentially impacting the subscription revenues Microsoft derives from its Office 365 packages.

Broader Market Reactions

Microsoft’s decision also comes at a time when the company is navigating a complex landscape of shareholder activity. Large institutional investors like Itau Unibanco Holding S.A. and MBL Wealth LLC have been adjusting their stakes in Microsoft, signaling varying levels of confidence in the company’s future performance. While some investors are trimming their positions, others are increasing their holdings, reflecting the mixed sentiments surrounding Microsoft’s ongoing regulatory challenges.

Insider activity has also been notable. Recent disclosures show that CEO Satya Nadella and EVP Takeshi Numoto sold significant portions of their Microsoft shares. While such transactions are not uncommon, they often serve as a barometer for executive confidence in the company’s strategic direction.

In the broader tech sector, Microsoft’s decision could set a precedent. Other tech giants, particularly those offering bundled services, may face similar scrutiny from regulators. The unbundling of Teams could signal the start of a new era where tech companies are held to higher standards of competition and transparency.

Microsoft’s agreement with the EU not only avoids hefty fines but also reshapes its business practices, marking a watershed moment in how tech giants operate in regulated markets. The unbundling of Teams from Office 365 could set a precedent for greater competition and transparency, benefiting both consumers and the broader tech ecosystem.