Licensing…it’s one of those topics that’s never fun but always critical to discuss.

Every week, I get emails, calls, and LinkedIn messages from prospects and clients asking things like:

• “How does Microsoft Fabric licensing actually work?”
• “What’s the cost difference between pay-as-you-go and reserved capacity?”
• “How do I avoid overspending?”

Making sense of Fabric licensing isn’t just about avoiding mistakes—it’s about setting your organization up for success. Licensing impacts everything from your team’s efficiency to your bottom line.

That’s exactly why we put this Fabric license guide together. Whether you’re just starting your Fabric journey or optimizing your current setup, we’ll help you navigate this complex terrain with confidence.

What Is Microsoft Fabric?

Microsoft Fabric offers a comprehensive solution that integrates tools like Power BI, Synapse, and Data Factory. It addresses a common pain point for data-driven organizations: switching between disparate systems to manage, analyze, and act on data.

With Fabric, all your data needs are managed under one roof, streamlining workflows and enabling real-time insights—helping organizations move from reactive to proactive decision-making.

If you’ve ever felt bogged down by siloed systems or limited by tools that don’t “talk” to each other, Fabric is designed for you. By unifying your data ecosystem, it:

• Reduces operational inefficiencies.
• Improves collaboration between technical and non-technical teams.
• Provides faster access to the insights you need to stay competitive.

In short, Fabric helps organizations do more with less—making your data work harder so your team can work smarter.

What Problems Does Microsoft Fabric Solve?

Microsoft Fabric isn’t just a tool—it’s a solution to the everyday struggles of managing and leveraging data effectively. Here are a few scenarios of how organizations might use Fabric to solve real-world problems and drive better outcomes.

Integrated Analytics Across Departments

Imagine a marketing team collaborating with finance and operations without jumping between multiple tools. Fabric makes it possible to consolidate data sources and generate actionable insights in real time.

End-to-End Data Engineering and Science

From ingesting raw data to building predictive models, Fabric enables seamless collaboration between data engineers, data scientists, and business users.

Real-Time Operational Decision-Making

For industries like retail or logistics, real-time data is essential. Fabric’s unified platform allows organizations to detect and react to inventory shortages, supply chain disruptions, or fraud instantly.

Simplified Planning and Forecasting

Fabric’s integration with Power BI unlocks advanced planning features, such as write-back capabilities, enabling teams to adjust forecasts and budgets dynamically.

Understanding Fabric Capacity and Compute Units (CUs)

Before diving into the details of Fabric’s capacity-based licensing model, it’s important to clarify one foundational requirement…

Microsoft Fabric requires a Microsoft 365 license for all users interacting with the platform. However, not all Microsoft 365 licenses include Fabric, so organizations need to ensure they select the correct licensing combination to support their teams.

Unlike traditional per-user licensing models, Microsoft Fabric operates on a capacity-based model. This approach allocates resources dynamically based on workload demands, providing flexibility and scalability through Compute Units (CUs). Let’s break down what this means for your organization.

What Is Fabric Capacity?

With Fabric, you only need one type of capacity to power all your experiences across the platform. A Microsoft Fabric capacity resides on a tenant and acts as a distinct pool of resources allocated for data operations. The size of the capacity determines the amount of computational power available to your organization.

Fabric capacity simplifies provisioning by removing the need to manage separate resources for each project or workload. Instead, your capacity encompasses all Fabric services—whether you’re running Power BI, Synapse, or Data Factory workflows.

It’s important to note that storage is licensed separately, meaning Fabric’s capacity only covers the computational resources required for tasks.

Another important note is that for any Fabric SKU under F64, users interacting with Power BI components will also require a Power BI Pro license. This ensures proper access and functionality across the platform.

What Type of Compute Is Associated With Fabric Capacity?

Microsoft Fabric employs a flexible computing model that supports a variety of workloads. Resources such as CPU, memory, disk I/O, and network bandwidth are allocated dynamically, with Compute Units (CUs) serving as the universal measurement for resource usage.

Fabric operations fall into two categories:

• Interactive Operations: On-demand tasks triggered by user actions, such as querying a report or dashboard. These operations are designed for quick responses, and compute resources are allocated as needed.
• Background Operations: Scheduled tasks, such as data refreshes or pipeline executions, that run without user interaction. These operations are allocated resources in advance for consistent performance.

Fabric’s capacity adjusts dynamically to workload demands, allowing for scaling up or down based on usage. Resource consumption is measured in CUs, offering a unified way to manage resources and ensure scalability, performance, and cost efficiency.

What Are the Available Fabric SKUs?

Microsoft Fabric offers a range of SKUs tailored to meet different organizational needs, with varying levels of capacity and Power BI integration.

Here’s an overview of the available SKUs and their key attributes:

More information about Fabric SKUs:

• Smaller SKUs Require Additional Licensing: SKUs smaller than F64 (i.e. F2, F4, F8, F16, and F32) require a Pro or Premium Per User (PPU) license, or a Power BI individual trial license, to consume Power BI content.
• Trial Capacity: Fabric offers a trial capacity of 64 CUs, enabling organizations to test its features with 8 Power BI v-cores.
• Scaling Options: SKUs scale significantly, from smaller options like F2 (2 CUs) to F2048 (2048 CUs), allowing businesses to choose a capacity that aligns with their workload requirements.
• Power BI Integration: Higher SKUs, starting from F64, include dedicated Power BI SKUs (i.e. P1, P2) and additional v-cores, enabling high-performance analytics and visualization. These higher SKUs also include Power BI free licenses for app viewers and require a Pro license for Power BI developers.

This range of SKUs ensures flexibility for organizations of all sizes, from startups exploring data solutions to enterprises managing complex workloads. Choosing the right SKU depends on your organization’s current needs and projected growth.

Just know that Microsoft is deprecating Power BI Premium licenses in favor of F64 and higher SKUs. Additionally, Power BI licensing costs are set to increase in 2025. You can read more about these updates here and here.

What Are the Feature Differences Across Fabric SKUs?

Microsoft Fabric offers two primary types of SKUs: F SKUs and P SKUs. While both enable organizations to leverage Fabric’s robust data capabilities, their features differ significantly, catering to different operational and organizational needs.

However, P SKUs are being deprecated, meaning the distinctions outlined below reflect the current state but will evolve as Microsoft transitions fully to F SKUs.

Here’s a breakdown of key feature differences:

• Power BI Autoscale: Available only in P SKUs, allowing for dynamic scaling of Power BI resources to handle demand spikes. Not supported in F SKUs.
• Copilot: Requires F64 or higher for F SKUs and is fully supported in P SKUs, empowering users to interact with data using natural language queries.
• Managed Private Endpoints: Included in all F SKUs or trial capacities. Not supported in P SKUs.
• Trusted Workspace Access: Supported in all F SKUs, but unavailable in P SKUs.
• ARM APIs and Terraform: Supported exclusively in F SKUs, providing advanced automation and infrastructure management options.
• Pause and Resume Your Capacity: Available in F SKUs, allowing organizations to save costs during periods of inactivity. Not supported in P SKUs.
• On-Demand Resizing: Supported in F SKUs, enabling organizations to scale capacity as needed. P SKUs do not include this flexibility.
• Bring Your Own Key for Power BI: Available across both F and P SKUs, enhancing security by allowing organizations to manage their encryption keys.
• Private Links: Supported in both F and P SKUs, providing secure, private access to resources.
• Viewing Power BI Items Without a Per-User License: Requires F64 or higher for F SKUs and is fully supported in P SKUs, making it easier to share reports without needing individual licenses.

F SKUs offer greater flexibility and advanced management features like pausing, resizing, and automation tools, making them ideal for organizations with fluctuating or complex workload demands.

P SKUs, while currently excelling in features like Power BI Autoscale, are being phased out, so organizations relying on them should plan for the shift to F SKUs as Microsoft evolves its offerings.

Optimizing Fabric Licensing for Your Organization

We know that Microsoft Fabric’s licensing options bring on migraines almost immediately. But with the right strategies, you can tailor your approach to licensing to meet your organization’s unique needs while managing costs effectively.

Fabric’s capacity-based model offers flexibility, but understanding features like pay-as-you-go, reservations, pausing capacity, and smoothing can make a significant difference in your budget and operational efficiency.

Let’s break down the key factors to consider and actionable tips to help you optimize your Fabric licensing strategy.

How Much Does a Microsoft Fabric License Cost?

When it comes to Microsoft Fabric licensing, the pricing model is distinct from other Microsoft products. Unlike Microsoft 365’s per-user pricing or Azure Synapse’s consumption-based costs, Microsoft Fabric operates primarily as a Software-as-a-Service (SaaS) subscription based on allocated capacity.

Fabric’s capacity-based model ensures that organizations can choose a tier that matches their workload demands, providing flexibility and scalability. With this approach, businesses pay for the capacity allocated, rather than individual user licenses or direct consumption.

Understanding related listing scenarios:

While Fabric’s primary model centers on capacity SKUs, there are cases where per-user licensing may apply. These niche scenarios depend on the workspace license mode and user access requirements, such as Power BI Pro licenses needed for developers.

By focusing first on capacity SKUs and layering in related licensing details, organizations can better understand the broader structure of Microsoft Fabric pricing and identify the options that align with their needs.

Is There a Microsoft Fabric Free License?

Microsoft Fabric offers a free trial license that provides organizations with 60 days of access to most Fabric features. This trial allows teams to explore the platform and test its capabilities, including Power BI, Synapse, and Data Factory workflows.

However, Copilot functionality is not included in the trial capacity. This limitation is important to note for organizations hoping to evaluate AI-driven data interaction features.

While the trial is an excellent starting point for exploration, it is not a long-term solution. Organizations planning to adopt Fabric for production use will need to transition to a paid SKU to unlock the full range of features, including Copilot and other advanced capabilities.

How Do CUs Translate Into Cost?

Microsoft Fabric uses a capacity-based pricing model, where costs are tied to the number of Compute Units (CUs) allocated within a specific SKU. This approach allows organizations to select a capacity tier that aligns with their workload needs while maintaining flexibility and scalability.

The table below breaks down the cost of each SKU under the pay-as-you-go and reservation options. Please note that pricing varies by geographical area, and the table reflects costs for the Central US region. For more details, refer to Microsoft’s pricing page.

Key takeaways for the cost of CUs:

• Cost Savings with Reservation: Organizations with predictable workloads can save approximately 40.5% by committing to a one-year reservation plan instead of using the pay-as-you-go option.
• Flexibility with Pay-as-You-Go: For organizations with fluctuating or temporary workloads, the pay-as-you-go option allows dynamic scaling and the ability to pause capacity, avoiding over-provisioning during off-peak periods.
• Scaling Based on CUs: Higher SKUs (i.e. F512 or F1024) offer exponentially more capacity, making them ideal for enterprise-level workloads that demand significant computational resources.
• Small Business-Friendly Options: Lower SKUs like F2 or F4 provide cost-effective entry points for smaller organizations testing Fabric’s capabilities.

What Is the Difference Between the Pay-as-You-Go and Reservation Options?

Microsoft Fabric offers two flexible payment options for capacity: Pay-as-you-go and reservation. Each option caters to different organizational needs, offering flexibility or cost savings depending on usage patterns.

Pay-as-You-Go

Pay-as-you-go capacity allows you to scale resources dynamically based on demand. This model is ideal for organizations with fluctuating workloads or short-term projects, as it lets you adjust your capacity or pause it entirely without any long-term commitment.

Reservation

Reservation involves committing to a specific capacity for a one-year term. This option is suited for organizations with predictable workloads, as it offers significant cost savings compared to pay-as-you-go.

Example of Cost Savings: Pay-as-You-Go vs. Reservation

To illustrate the cost difference, let’s take the F64 SKU as an example:

• Pay-as-You-Go: Running continuously 24/7 for a month costs $8,409.60.
• Reservation: Committing to a one-year reservation reduces the monthly cost to $5,002.67—a savings of ~$3,407 or ~41%.

This pricing structure rewards organizations that can accurately forecast their capacity needs.

When Does Pay-as-You-Go Make More Sense?

In some scenarios, pay-as-you-go may be the better financial option, even with its higher hourly rate:

If your F64 SKU runs only 8–10 hours per day, your costs range between $2,856 and $3,571 per month. This is significantly lower than the monthly reservation cost of $5,002.67, making pay-as-you-go more cost-effective for intermittent or off-peak usage patterns.

Can I Save Money by Pausing My Fabric Capacity SKU?

Yes, Fabric offers a pause and resume feature, allowing organizations to suspend capacity usage during inactive periods to save costs. When paused, Compute Unit (CU) consumption stops entirely, meaning you won’t incur charges for that capacity.

Pausing immediately stops all ongoing tasks and background operations, which may require a system restart upon resumption. While pausing saves costs, it clears caches, causing a temporary performance slowdown when the system is restarted.

This feature is ideal for organizations with predictable downtime, such as weekends or after business hours.

Should You Plan for Average or Peak Usage? Understanding Smoothing

When purchasing a Fabric capacity SKU, many organizations wonder whether they should plan for average or peak usage. Thanks to Microsoft Fabric’s smoothing feature, you can plan for average usage without worrying about sudden spikes in demand.

Smoothing dynamically balances capacity usage by spreading resource consumption over time, allowing your workloads to operate smoothly even during peak demand periods. Here’s what you need to know:

• For interactive jobs (i.e. user-triggered actions), capacity consumption is averaged over a minimum of five minutes to prevent temporary spikes from impacting performance.
• For background jobs (i.e. data refreshes), capacity is balanced across a 24-hour period, ensuring consistent operation.

For example, if a morning workload generates a sudden spike in demand, Fabric’s smoothing feature temporarily increases capacity to handle the load. Later, it redistributes unused capacity during lower-demand periods to maintain balance without exceeding your allocated CUs.

Smoothing allows you to size your capacity based on typical workloads rather than over-provisioning for rare peak events. This not only simplifies capacity management but also optimizes costs by preventing unnecessary scaling.

Common Concerns About Fabric Licensing

Navigating Microsoft Fabric’s licensing can raise important questions for organizations looking to maximize their investment while avoiding common pitfalls. Let’s address some of the top concerns prospects and customers often have when managing Fabric licensing.

What Happens If a Company Exceeds Its Fabric Capacity and Can’t Clear Usage Within 24 Hours?

Microsoft Fabric’s smoothing feature helps organizations balance capacity over a 24-hour period, ensuring that workloads can handle temporary spikes without exceeding allocated resources.

However, if your organization exceeds its available capacity and cannot reduce the “carryforward” usage within the 24-hour window, strict throttling measures are enforced. During this time, all new operations—both interactive and background tasks—are suspended until usage falls back below 100% of the allocated capacity.

If this scenario occurs frequently, it may indicate that your workload demands are outgrowing your current capacity level. Scaling up to a higher capacity SKU can help maintain smooth operations and avoid disruptions.

How to avoid exceeding your available capacity:

• Monitor usage patterns with the Fabric Capacity Metrics App to identify high-demand periods and optimize resource allocation.
• Leverage smoothing to handle occasional spikes without over-provisioning for peak workloads.
• If peak usage regularly exceeds your current allocation, consider scaling up to ensure consistent performance.

What’s the Best Way to Monitor Fabric Capacity Usage?

The Fabric Capacity Metrics App is your go-to tool for monitoring and visualizing recent utilization. It breaks down consumption by item types, such as semantic models or pipelines, giving you actionable insights to optimize operations.

Regularly reviewing capacity metrics can help identify underutilized resources and optimize scheduling for high-demand jobs during off-peak hours.

Will I Ever Incur Unexpected Charges Over My List Price?

In most cases, Microsoft Fabric’s capacity-based pricing model ensures predictable costs. However, there are two scenarios where unexpected charges could occur:

1. Pausing and Resuming Capacity

Using the Pause/Resume feature clears any queued or throttled jobs immediately. This action may trigger additional charges for the extra capacity consumed up to that point, as the workload was not allowed to be smoothed over a 24-hour period.

This scenario typically arises when an organization reaches its capacity limits and opts to Pause/Resume to avoid delays caused by queued jobs or slow performance. These charges are billed at pay-as-you-go rates and are capped at no more than one additional day of capacity usage.

2. Manual Scaling

Choosing to manually scale up your capacity SKU results in higher costs due to the increased allocation.
These scenarios can be avoided with proper workload planning, effective use of the smoothing feature, and consistent monitoring of usage patterns to ensure your capacity aligns with your organizational needs.

How Is Storage Charged Since It’s Separate from Capacity?

Microsoft Fabric licenses cover computational resources, but storage is licensed separately through OneLake Storage. As a unified data lake, OneLake consolidates all your organizational data, simplifying access and management.

Storage costs are based on the volume of data stored and include charges for OneLake storage, BCDR storage, and cache. Be sure to account for storage costs in your overall Fabric budget, especially if your data volumes are substantial.

Pricing varies by geographical area, and the table below reflects costs for the Central US region. For detailed pricing, refer to Microsoft’s OneLake pricing page.

Choosing the Right Microsoft Fabric License for Your Organization

We get it—Microsoft Fabric licensing can feel overwhelming.

With so many options, technical details, and features to consider, it’s easy to feel unsure about the best path forward.

At Collectiv, we believe that licensing shouldn’t be such a lonely and difficult process. Whether it’s avoiding overspending, ensuring compliance, or finding the right capacity to support your team’s needs, our goal is to help you make confident, informed decisions.

As a trusted Microsoft partner, Collectiv helps clients navigate the complexities of Fabric licensing. We also provide solutions like our Fabric Tenant Governance Solution, which delivers deeper insights into Fabric Capacity utilization, Power BI usage, and security, ensuring your investment is optimized for your organization’s unique needs.

We’ll work with you to understand your unique challenges and tailor solutions that align with your organization’s goals. Reach out so we can help you select the right Fabric license and strategy.

The information provided in this blog is accurate to the best of our knowledge at the time of publishing and is intended for general informational purposes. However, Microsoft products, licensing models, and pricing strategies are subject to change as they continue to evolve.

Please note that the pricing referenced does not account for any organization-specific discounts or enterprise agreements that may apply to your Microsoft account.

We strongly encourage readers to contact Microsoft directly or consult their Microsoft account representative for specific questions regarding licensing, pricing, or enterprise agreements tailored to their organization.