Understanding Microsoft’s Licensing for Entra ID Governance for External Users

• Entra ID Governance can now be licensed for management of external users.
• The licensing model is based on monthly active users, with an unusual twist that could reduce costs.
• This Entra ID Governance licensing tier only makes sense when organizations are managing internal applications used by external users.
• The new licensing option does not change existing Entra ID P1 or P2 licensing.

The Entra ID Governance tier of Entra ID, typically an add-on to other paid tiers of Entra ID, can now be used to license external users. Microsoft refers to these external users as “guest users,” and licensing them centers on the number of monthly active users (MAUs). The licensing model, which Microsoft began applying in late July 2025, requires connecting an Azure subscription that will be used for billing, and only charges for each unique guest user whose account is actively managed each month. It is not based on the account simply existing or the user accessing Entra ID or Entra-integrated applications. This MAU determination creates a unique licensing model that could be marginally more affordable than most other MAU-based licensing models. However, organizations that are actively performing management of a large number of guest users could see significantly larger bills than they initially expected.