How to find wasted Microsoft 365 licenses (2026 guide)

Microsoft 365 cost optimization · ~7 min read

Microsoft raised Microsoft 365 list prices on July 1, 2026 — Microsoft 365 E3 to $39 and E5 to $60 per user, per month. For most organizations the bigger problem isn't the new price; it's how many of those seats are doing nothing. Gartner estimates organizations waste 25–30% of SaaS license spend on unused or underutilized licenses. On a 100-seat E3 tenant, that's roughly $9,000 a year hiding in plain sight.

This guide shows exactly where M365 license waste accumulates, how to find it with read-only Microsoft Graph queries, and — the part most teams skip — how to turn the findings into a dollar figure your finance team will actually act on.

The five places license waste hides

Unassigned purchased seats. You bought the seats; nobody's assigned to them. The cleanest refund at renewal.
Disabled-but-licensed accounts. Blocked sign-in, but still consuming (and billing for) a license every month.
Never-signed-in users. Provisioned, licensed, and never logged in once.
Inactive users. No sign-in in N days — you choose the threshold (30/60/90).
Over-provisioning. Users on E5 who only ever needed E3 ($21/user/mo back), or users carrying two base plans at once.

Step 1 — Read your license inventory

Everything here is read-only. Install the Microsoft Graph PowerShell SDK and connect with read scopes:

Install-Module Microsoft.Graph -Scope CurrentUser
Connect-MgGraph -Scopes "Organization.Read.All","User.Read.All","Directory.Read.All","AuditLog.Read.All"

# Purchased vs assigned per SKU
Get-MgSubscribedSku | Select-Object SkuPartNumber,
    @{n='Purchased';e={$_.PrepaidUnits.Enabled}},
    @{n='Assigned'; e={$_.ConsumedUnits}}

The gap between PrepaidUnits.Enabled and ConsumedUnits is your unassigned-seat waste — the fastest win.

Watch the SKU names. Microsoft's skuPartNumber values are full of legacy traps. Microsoft 365 Business Standard is literally O365_BUSINESS_PREMIUM; Business Premium is SPB. Map them carefully or your report will mislabel seats.

Step 2 — Pull users, licenses, and activity

Get-MgUser -All -Property `
  id,displayName,userPrincipalName,accountEnabled,assignedLicenses,createdDateTime,signInActivity

Two gotchas that bite most homegrown scripts:

signInActivity requires Microsoft Entra ID P1. On a non-premium tenant, including it makes Graph return 403 for the entire query. Wrap it: try with signInActivity, and on failure retry without it (you can still find disabled and unassigned waste).
Free/self-service SKUs report a giant "unlimited" seat count. Power Automate Free and friends can show millions of "prepaid" units. Exclude any SKU whose enabled count is implausibly large before you sum unassigned seats.

Step 3 — Turn seats into dollars

This is the step that separates a useful audit from a CSV nobody reads. "47 inactive users" gets a shrug. "$13,056/year recoverable" gets a meeting. Map each skuPartNumber to its real price (use your contracted/regional rate, not just list), then:

Finding	Recoverable $ / month
Unassigned seats	unassigned × unit price
Disabled + licensed	sum of those users' license prices
Never signed in	sum of those users' license prices
Inactive > N days	sum of those users' license prices

Annualize (×12) for the headline. Keep over-provisioning (E5→E3, plan overlap) as an advisory section so your headline number stays conservative and defensible.

Step 4 — Act, then keep it clean

Reclaim unassigned seats at renewal, strip licenses off disabled accounts, offboard never-signed-in leftovers, and review inactive users with their managers. Then re-run monthly — waste creeps back the moment offboarding slips.

Skip the assembly

SeatScout runs every check above in one command and produces a dollar-quantified, CFO-ready report — read-only, entirely inside your own tenant. There's a free tier.

Get SeatScout →

FAQ

Can I find unused M365 licenses without Entra ID P1?

Partly. Without P1 you can't read sign-in activity, so inactive/never-signed-in detection is unavailable — but you can still find disabled-but-licensed accounts and unassigned purchased seats, which are often the largest, cleanest wins.

Is querying this data safe?

Yes — all of it is read-only Microsoft Graph. None of the queries above modify your tenant. Reclaiming licenses is a separate, deliberate step you control.

How much can a typical org recover?

Gartner pegs SaaS waste at 25–30% of spend; license-optimization vendors report finding 10–30% of M365 spend as waste in most environments. The exact figure depends on offboarding hygiene and how aggressively E5 was rolled out.

Sources: Microsoft 365 2026 pricing (Microsoft Licensing); average SaaS license waste 25–30% (Gartner, as cited by license-optimization vendors). SeatScout is independent and not affiliated with Microsoft.