What's Coming in Copilot Wave 3?
Copilot for Microsoft 365 wave 3 is here. But what does this mean for your business? In today’s article, Conall O’Kane, Modern Workplace Practice Manager at Storm, shares what’s changing.
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Released in March 2026, Wave 3 of Copilot for Microsoft 365 marks a change in how users will interact with Copilot. Copilot will now act as more of an assistant, working alongside you and taking on more complex multi-step tasks, while still operating securely at enterprise scale. Below we discuss some of the interesting features coming in Copilot wave 3.
Deeper Integration into Word, Excel, PowerPoint and Outlook
One of the more practical improvements in Wave 3 is how Copilot now works inside the core Microsoft 365 apps. Many AI tools can often miss key context for creating content like documents. Users receive a draft, paste it into a document, and spend time reformatting and adjusting it to suit their actual needs. Version sprawl happens quickly as the produced files can be locally downloaded. Wave 3 changes this by using the power of Work IQ (the intelligence layer that helps personalise your M365 Copilot to you and your organisation), to keep context at the centre of your work. Content will better reflect the most current and relevant information from across your files, chats, and meetings.
With this accuracy, Copilot will now work inside Word, Excel, PowerPoint and Outlook to carry out processes from start to finish, creating, editing and refining content within the apps where your work already lives and enforcing existing Microsoft 365 permissions and tenant-level controls. This means you spend less time making edits to work, and your business can easily apply governance, compliance, and retention policies at scale to prevent protected content from being processed by Copilot.
In Word, Copilot can take a rough brief and refine it into a polished draft. In Excel, it works with real formulae rather than producing placeholder content you need to fix. In PowerPoint, it understands your organisation's layouts, object styles and brand kits, so slides look like they came from your team rather than a generic AI template. In Outlook, it drafts and refines emails directly in your inbox. These capabilities in Word and Excel are now generally available, with PowerPoint and Outlook capabilities rolling out over the coming months.
Agents in Chat
Not every task begins inside a document or spreadsheet. Often, work starts with a question or a rough idea, and Wave 3 accounts for that.
Copilot Chat is now a proper entry point for action, not just conversation. From directly within Copilot chat, agents can create documents, spreadsheets and presentations, or handle common workplace actions like scheduling a meeting or drafting and sending an email to your team. You don't need to copy and paste between tools or switch context. The work happens from inside the conversation. Workers can even create their own agents using the Agent Builder, empowering users to get creative and harness AI to automate processes that are more tailored to their roles and needs.
Schedule from chat and custom instructions are already available, while send an email from chat is rolling out in the coming months.
Agent 365: AI Governance at Scale
As agents become a bigger part of how organisations work, the question of oversight is becoming increasingly important. Agent 365 is the solution. Generally available on the 1st of May 2026, Agent 365 provides a single control space for IT and security teams to observe, secure and govern every agent in the organisation. Rather than requiring organisations to build new infrastructure, Agent 365 extends the same management and security processes already used for employees, through Microsoft Admin Centre, Defender, Entra and Purview.
If you already have processes and policies in place for managing users securely, agents should slot into that same framework and be treated as users with their own permissions. Agent 365 makes that possible without adding unnecessary complexity.
Copilot Cowork
Currently being tested with a limited set of customers, the headline feature of Wave 3 is Copilot Cowork, the most significant change in how AI fits into your workday. Microsoft has worked closely with Anthropic to bring the technology that powers Claude into Copilot for Microsoft 365. In simple terms, this means that your work will no longer be limited by one brand of AI models. Copilot will now choose the right model to carry out the right tasks. This multi-model approach means organisations benefit from the best available capabilities as the market evolves, without having to rebuild their tooling every time a new model comes along.
Up until now, most AI tools have worked in single exchanges. Users ask questions, AI provides answers. Users give prompts, AI produces output. Cowork moves beyond that pattern. Rather than responding to one prompt at a time, Copilot Cowork will now take on longer, more complex work, breaking it down into steps, reasoning across your files and tools, and carrying out tasks over minutes or even hours.
In practice, this means that instead of asking Copilot to draft a document and then manually pulling in the right data, references, and structure yourself, you can delegate the whole task. Copilot works through it, gives updates on progress, and provides users opportunities to redirect Copilot as the content develops.
Everything Cowork does is observable and transparent, operating within Microsoft's existing security, identity, and governance framework. You can review progress throughout the steps, adjust direction, or stop work entirely. This level of visibility and transparency is especially important for organisations that have been hesitant about AI taking on more autonomous roles.
Broader access to Copilot Cowork will soon be rolling out through Microsoft's Frontier programme. However, it's important to note that due to the integration of Claude (an Anthropic model) into Copilot Cowork, this feature is not yet available to most EU organisations. This is due to concerns around data processing outside of the EU Data Boundary, as Anthropic processes data in the US, Europe, Asia and Australia by default. In simple terms, the current verdict is that the Anthropic Claude integration may be non-compliant for processing personal data outside of the EU, under GDPR.
What Does Wave 3 Mean for Your Organisation?
The shift from AI assistance to AI execution is one organisations need to be ready for. The tools in Wave 3 are capable of taking on complex work autonomously, and that creates both opportunity and responsibility.
The opportunity is faster output, less time spent on routine tasks, and AI that works within your existing systems rather than alongside them. The responsibility sits with IT and business leaders to ensure agents are governed properly, that staff understand what AI is doing on their behalf, and that the right policies are in place before these capabilities scale across the workforce.
If you're interested in hearing more M365 Copilot insights and what it takes to run a successful Copilot pilot, register for our upcoming virtual fireside chat, ‘The Copilot Pilot That Works: Candid Lessons from the Front Line.’ Our Copilot enablement team will share the honest truths, surprising wins, unexpected blockers, and the decisions that had the most impact on our own internal Copilot implementation.
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