Azure AD Group Licensing with Nested Groups
Create, configure, and manage Microsoft Entra identities
Answer
Correct answer: B — Assigning the license to Group1 uses 2 licenses because only direct user members (User1 and User2) are licensed, not nested group members.
You have an Azure Active Directory (Azure AD) tenant that contains the following objects. ✑ A device named Device1 ✑ Users named User1, User2, User3, User4, and User5 Five groups named Group1, Group2, Group3, Group4, and Group5 [sampleXML/xmlfile-29_3.png] The groups are configured as shown in the following table. [sampleXML/xmlfile-30_1.png] How many licenses are used if you assign the Microsoft 365 Enterprise E5 license to Group1?
Community Insight
The core concept tested is the non-inheritance of licenses in nested groups; the common trap is assuming all users within any member group (direct or nested) receive the license.
This question tests the limitations of Microsoft Entra ID group-based licensing, specifically regarding nested groups. It establishes that licenses are only assigned to direct user members and do not propagate through group nesting.
Many learners incorrectly choose D (4) by counting User1, User2, User3, and User5, mistakenly including User4 who is a member of Group4 rather than directly in Group1.
Community Discussion (37 comments)
louismt
👍 1
Selected: B
Nested groups are not supported with group based licensing.
DULU1
👍 1
Selected: D
4 licences used.
Lilianeze
👍 1
Selected: C
When you assign a Microsoft 365 Enterprise E5 license to Group1, the license will apply to all users within the group — not devices, and not duplicated if the user already has it assigned elsewhere. Let’s break it down: Group1 Members: User1 ✅ (counts — not licensed yet) User3 ✅ (counts — not licensed yet) Group2 (Dynamic User group) contains User2 ✅ (counts — not licensed yet) Group4 (Microsoft 365 group) contains User4 ❌ (already licensed via Group4, doesn’t count again) User5 is not part of Group1 — ❌ ignore Device1 is not a user — ❌ ignore User4 already has a license — ❌ ignore Group2 and Group4 are containers, only their user members count ✅ So the unique users who will consume the license via Group1: User1 User2 User3 That’s 3 licenses used.
ubt
👍 4
This is a Copilot answer which is incorrect, it thinks nested groups will take the licence too, if you ask it for an article to proove it, it will give you an article that actually shows you its incorrect
test123123
👍 1
Selected: B
Nested group do not inherit licenses.
AlexBrazil
👍 3
Selected: B
Agreed: "Group-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied."
srysgbvjumozmail
👍 2
Group4 (MS365) in Group1(Security) is it possible? contraduction with Topic1-Question9
BigDogAG
👍 1
But why is it 2 and not 1?
Futfuyfyjfj
👍 1
The er is no 1 option amongst the possible answer options right?
RahulX
👍 4
B: 2 licenses, because nested group do not inherit licenses and M365 Group can not be member of Security Group.
mikekrt
👍 1
Selected: B
2 licenses
EmnCours
👍 2
Selected: B
Group-based licensing currently doesn't support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied.
EmnCours
👍 1
Selected: B
Answer is correct.
dule27
👍 2
Selected: B
B: 2 licenses
f2bf85a
👍 3
Selected: B
It doesn't affect the correct answer, but M365 Groups (Group4) cannot be contained to other groups. This example showing that Group1 contains Group4 is wrong. https://learn.microsoft.com/en-us/azure/active-directory/fundamentals/how-to-manage-groups#add-or-remove-a-group-from-another-group
broncobucks
👍 1
Selected: B
agree it is b
jojoseph
👍 3
B. nested group do not inherit licenses
ANDRESCB1988
👍 1
correct, nesting is not support to assing license
Lion007
👍 3
Selected: B
Correct, answer is B. "Group-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied." https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced#limitations-and-known-issues
Tokiki
👍 1
agree, B
Sh1rub10
👍 3
Selected: B
nested group do not inherit licenses
WS_21
👍 1
Selected: B
https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced#limitations-and-known-issues
GPerez73
👍 2
Selected: B
Correct B. Tested
SuperMax
👍 4
According to: https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced --> Limitations and known issues: - Group-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied. - The feature can only be used with security groups, and Microsoft 365 groups that have securityEnabled=TRUE.
TBRate3w254325
👍 5
Answer B is correct. Funny thing...Microsoft goofed on the scenario. Group 1 can't have Group 4 as a member... Microsoft 365 Groups can't be members of security groups https://docs.microsoft.com/en-us/microsoft-365/admin/create-groups/compare-groups?view=o365-worldwide
AmazingKies
👍 1
roup-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied. https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced#limitations-and-known-issues
melatocaroca
👍 1
Group1 contain User1, User3, Group2, Group4, So one license for User1, one for User3, one for the user within group2, user2, So IMHO 3 licenses Group-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied. That discard Group4, from getting a license from group 1
melatocaroca
👍 1
Use group-based licensing with dynamic groups You can use group-based licensing with any security group, which means it can be combined with Azure AD dynamic groups. Dynamic groups run rules against user resource attributes to automatically add and remove users from groups. For example, you can create a dynamic group for some set of products you want to assign to users. Each group is populated by a rule adding users by their attributes, and each group is assigned the licenses that you want them to receive. You can assign the attribute on-premises and sync it with Azure AD, or you can manage the attribute directly in the cloud. Licenses are assigned to the user shortly after they are added to the group. When the attribute is changed, the user leaves the groups and the licenses are removed. https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced
gills
👍 71
The answer is simple. Answer is correct. Why? Because nested group do not inherit licenses.
jt63
👍 9
https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced#limitations-and-known-issues
Ed2learn
👍 3
I don't know when the change was made but at one point you could only assign licenses to security groups - not Microsoft groups. The purpose of microsoft groups were for collaboration (sharing resources). Security groups were for boundaries. Tested in lab - you may NOT add groups to M365 groups. You may add Security groups to a security group but not add a M365 to a security group. If Security group 1 has user one and an E5 license is assigned to the group and you join security group 2 with user 2 and assign Power BI (for example) to the group- User one will only have E5 and user 2 will only have Power BI license.
allgiga
👍 3
Correct. B Group-based licensing currently does not support groups that contain other groups (nested groups)
Domza
👍 5
no Group nesting is supporting while assigning licenses - users only
Domza
👍 1
to make sure you know your stuff :)
Dobby_41
👍 36
Group 4 cannot be a member of group 1.
sapien45
👍 6
Good catch
olnn
👍 4
correct but why group4 is member of group1?
Comments & Corrections
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Expert Analysis
Why the Answer Is Correct
Group-based licensing in Microsoft Entra ID applies licenses only to users who are immediate members of the target group. It does not support nested groups for license assignment. In this scenario, Group1 has two direct user members: User1 and User2. Therefore, assigning an E5 license to Group1 results in exactly 2 licenses being used.Why the Other Options Are Wrong
Option C (3) might be chosen if one incorrectly includes User3 from Group3, but Group3 is not a member of Group1. Option D (4) is incorrect because it counts User4 (member of Group4) and potentially misinterprets the hierarchy. Group4 cannot actually be a member of Group1 due to type restrictions (Microsoft 365 vs Security), but even if valid, its members wouldn't inherit licenses anyway.Community Comment Notes
Community consensus strongly supports B, citing that 'nested group do not inherit licenses'. Several comments correctly point out that 'M365 Group can not be member of Security Group', which technically invalidates the premise of Group4 being in Group1, but the primary licensing rule remains the decisive factor for the exam context.Official Reference
Exam Strategy
Always distinguish between direct membership and nested membership when calculating license usage. Remember that group-based licensing is flat; it does not traverse group hierarchies.
Frequently Asked Questions
Do nested groups inherit licenses in Azure AD?
No, group-based licensing does not support nested groups. Only immediate user members of the target group receive licenses.
Can a Microsoft 365 Group be a member of a Security Group?
Generally no, as they serve different purposes. However, the key exam point here is that even if allowed, nested members don't get licenses.
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