Copilot Chat vs Microsoft 365 Copilot
Microsoft offers two main ways to use AI at work, and the exam expects you to tell them apart. Choosing the wrong one wastes licenses or leaves users without work data.
The two experiences
| Microsoft 365 Copilot Chat | Microsoft 365 Copilot (licensed) | |
|---|---|---|
| Cost | Included for eligible Microsoft 365 users | Per-user add-on license |
| Sign-in | Work or school account (Entra ID) | Work or school account |
| Web grounding | Yes | Yes |
| Work data (mail, files, meetings) | Only content the user pastes or attaches | Full access through Microsoft Graph |
| In-app Copilot (Word, Excel, Teams, Outlook) | No | Yes |
| Agents | Pay-as-you-go agents | Included use of agents |
Copilot Chat is a free, secure chat with enterprise data protection. The licensed product adds the work-aware features.
How grounding works
Copilot follows a simple flow:
- The user enters a prompt in an app or in the Microsoft 365 Copilot app.
- Copilot grounds the prompt by retrieving relevant data through Microsoft Graph (mail, chats, files, calendar) and, if allowed, the web.
- The prompt plus that context goes to a large language model (LLM) hosted in the Microsoft 365 service boundary.
- Copilot checks the response and returns it to the app.
Key facts:
- Copilot honors existing permissions, sensitivity labels and retention. Oversharing in SharePoint therefore becomes Copilot oversharing.
- Prompts and responses are not used to train the foundation models.
- Data stays inside the Microsoft 365 service boundary and follows tenant data residency commitments.
What the licensed Copilot does
Examples tested often: summarize a Teams meeting, draft a reply in Outlook, create a presentation from a Word document in PowerPoint, analyze data with Copilot in Excel, and search across apps with Microsoft 365 Copilot Search. The Researcher and Analyst agents are also part of the licensed experience.
Licensing and billing
- Per-user license: assign it in the Microsoft 365 admin center (Users > Active users > Licenses and apps). The user also needs a qualifying base Microsoft 365 plan.
- Pay-as-you-go: billed through an Azure subscription linked in the Microsoft 365 admin center. It suits occasional use and agents shared with users who have no Copilot license.
Exam traps
- Copilot Chat is not the same as Copilot. It has no automatic access to mail and files through Graph.
- Copilot does not bypass permissions. To stop it from using content, fix the permissions or labels, not the Copilot settings.
- Microsoft Graph is the data source for grounding. Purview and Defender protect and monitor data but do not supply it.
- Pay-as-you-go is for unlicensed users or metered agents, not a replacement for licenses when users need Copilot in Word or Teams every day.
Practice questions
Choose an answer, then review the explanation to check your understanding.
1. What does Microsoft 365 Copilot use to find a user's emails, files and meetings so it can ground its answers in work data?
Show answer
Answer: B.Copilot retrieves organizational content through Microsoft Graph and only returns what the signed-in user is already allowed to see.
2. Users without a Copilot license need a secure AI chat that is protected by their work account, with web-grounded answers. What do they get?
Show answer
Answer: A.Microsoft 365 Copilot Chat is available to Entra ID users with an eligible Microsoft 365 subscription and does not need the add-on license.
3. A user asks Copilot to summarize a SharePoint site they have no permission to open. What happens?
Show answer
Answer: B.Copilot respects the user's existing permissions. It never shows data the user cannot already access.
4. A company wants unlicensed users to run a specific agent now and pay only for what they use. What billing model fits?
Show answer
Answer: B.Pay-as-you-go is metered billing linked to an Azure subscription, used for agents and features without assigning a per-user license.