In June 2025 Cursor changed its $20-a-month Pro plan from 500 fast requests to "$20 of frontier model usage at API pricing," with overage billed. Heavy users got surprise bills, so Cursor apologized and refunded charges. It kept growing past $1 billion in annualized revenue by November 2025. The lesson: include a set amount of usage, then charge transparently above it.
Key takeaways
- Never promise "unlimited" on anything that costs you money every time a customer uses it.
- Cursor's fix was a hybrid: a familiar $20 base price with included usage and transparent overage.
- Changing what a plan includes feels like a price rise, even when the headline price stays the same.
- A fast public apology and refunds protected trust, and growth carried on.
- Under the price sat a margin problem. Cursor's answer was cheaper models, then a sale to a company that owns one.
In The Subscription Playbook I wrote about Procore's pricing page, which promised "unlimited plans for every builder and budget."
My first reaction was: there must be a catch. There must be some limits to unlimited, right?
There were. Procore quietly priced on construction volume, so the big users paid for the big usage.
Cursor learned the same lesson in public, with thousands of developers watching.
Cursor is the AI code editor built by Anysphere. It's one of the fastest-growing subscription software businesses ever. And in June 2025 it showed everyone how not to change a price.
What Did Cursor Change in June 2025?
Cursor's $20-a-month Pro plan originally included 500 "fast" requests to the best AI models, then unlimited slower ones.
That sounds generous. The problem was the customers who used it most.
Some developers ran long, autonomous coding sessions that cost Cursor far more than $20 a month in model fees. A one-line question and a two-hour agent run both counted as "one request." The heavy users were being subsidized by everyone else, and by Cursor's investors.
So on 16 June 2025, Cursor switched Pro to "$20 of frontier model usage per month at API pricing." Only its "Auto" mode (where Cursor picks the model) stayed unlimited. Choosing a specific model drew down the $20 pool, and anything above it was billed as overage.
The logic was sound. The rollout wasn't.
Users who hadn't set spending limits got surprise bills. Many hadn't realized "unlimited" now meant "unlimited, but only in Auto." (Nobody reads the fine print, least of all a developer on deadline.)
How Did Cursor Handle the Backlash?
On 4 July 2025 Cursor published a post called "Clarifying our pricing." It didn't hedge:
"We recognize that we didn't handle this pricing rollout well, and we're sorry."
Then it did three things:
- Refunded unexpected usage charges incurred between 16 June and 4 July.
- Showed the math. At median usage, $20 covered roughly 225 Claude Sonnet 4 requests, 550 Gemini requests or 650 GPT-4.1 requests.
- Admitted the wording problem. It said it "was not clear that 'unlimited usage' was only for Auto."
That second step matters most. Customers can't judge a plan they can't picture. "$20 of usage" is abstract. "About 225 requests on this model" is something you can plan around.
The Numbers: Did the Pricing Change Hurt Growth?
No. Here's what happened next, using only reported figures.
| Date | What happened |
|---|---|
| 16 Jun 2025 | Pro moves from 500 fast requests to $20 of usage at API pricing |
| 4 Jul 2025 | Public apology, refunds for 16 June to 4 July |
| 29 Oct 2025 | Cursor launches its own in-house model, Composer |
| Nov 2025 | Passes $1 billion in annualized revenue; raises $2.3 billion at a $29.3 billion valuation |
| Quarter to Jan 2026 | Gross margin of -23% reported by Contrary Research |
| Late Apr 2026 | About $3 billion annualized revenue (Dealroom) |
| Early Jun 2026 | Tops $4 billion annualized revenue (Dealroom) |
| 16 Jun 2026 | SpaceX agrees to buy Cursor for a reported $60 billion (closed 14 Aug 2026) |
| 12 Oct 2026 | New users buy Cursor through SpaceXAI's "X Subscription" from $8 a month |
Look at the gross margin line. That's the real story underneath the pricing drama.
How Does Cursor Pricing Work in 2026?
According to SpaceXAI's 12 October 2026 announcement, new users now buy Cursor through the "X Subscription," which shares one weekly-refreshing usage pool across Cursor, Grok and X. Plus is $8 a month, Premium $30, Super $100 and Ultra $200. Third-party models such as Claude and GPT sit outside the pool and bill at API list price. Existing users can stay on the legacy $20 Pro plan.
You can see the full plan breakdown in our Cursor pricing teardown.
Find out what your heaviest users really cost you
Model token costs, heavy users and gross margin for your AI product before you set the price.
Why Did "Unlimited" Fail for Cursor?
Because Cursor was selling something with a real cost per use, and the cost per use wasn't the same for every customer.
In the book, I listed the downsides of usage-based pricing: less predictable revenue and customer confusion. That's why I recommended mixing usage with a subscription rather than going all in. Cursor ended up exactly there: a familiar base price, a set amount of included usage, and clear overage. That's hybrid pricing in a nutshell.
I've seen this movie before
In the book's chapter on moats, I gave an example from Close.com, a CRM for startups. It originally included unlimited free phone calls in its plans. After a while it pulled them out and charged per call on top of the monthly fee. Same lesson, smaller scale. If something costs you money every time a customer uses it, it doesn't belong in an "unlimited" bucket for long.
The other lesson is about gross margin. Gross margin is one of the moat factors I care most about, because buyers and investors pay more for businesses that keep more of each dollar. A reported -23% gross margin means every new customer made the hole deeper. Cursor's response was to build its own model, route work to cheaper models, and finally sell to a company that owns a frontier model.
And trust? Cursor's apology worked because it came fast, came with money back, and came with numbers. Customers forgave a mistake. They don't forgive feeling tricked.
What You Can Steal From Cursor
You don't need to be a $60 billion AI company to use this. Here's what I'd do in any business with a cost per use.
- Drop the word "unlimited." Say "includes X, then $Y each." A café can say "includes 30 coffees a month." An agency can say "includes 10 design requests."
- Model your top 10% of customers, not your average. They're the ones who will sign up first and use the most. The AI gross margin calculator does this for AI products.
- Send every affected customer a worked example of their own bill before a change goes live. For example: "Last month you used 340 requests. On the new plan, that would cost $27."
- Turn spending caps on by default. Optional caps protect the customers who read the fine print. Default caps protect everyone else.
- If you get it wrong, apologize publicly and refund fast. Cursor's growth survived because it did.
- Grandfather existing customers when you change the unit. Cursor did this again in October 2026, letting legacy users keep their plans.
If you're building credits rather than a dollar pool, the credit pack designer turns your cost per action into a rate card with a healthy margin.
When Is a Flat Unlimited Plan Still Fine?
When your cost per use is close to zero, or when customers physically can't overuse it.
Netflix can sell unlimited streaming because one more episode costs it very little. A car wash can sell unlimited washes because nobody washes their car 40 times a month. Cursor couldn't, because every request had a real bill attached from a model provider.
So ask yourself: what does one more use cost me? If the answer is "real money, and it varies," you need a limit. Then the only question is how clearly you explain it.
For the wider picture on pricing AI products, read our guide to usage-based pricing for AI, and see how a rival handled the same problem in Replit's effort-based pricing story.
Frequently asked questions
Why did Cursor stop offering 500 fast requests?
Because requests aren't equal. A quick question and a long, autonomous coding session both counted as one request, but the long session can cost many times more in AI model fees. Heavy users on a $20 plan were costing Cursor far more than $20. Switching to a dollar-based usage pool meant the plan's cost tracked the actual model bill.
Did Cursor refund customers after the pricing change?
Yes. In its 4 July 2025 post, "Clarifying our pricing," Cursor said it would refund unexpected usage charges incurred between 16 June and 4 July 2025. It also admitted it hadn't been clear that "unlimited usage" applied only to its Auto mode, and explained how far $20 of usage would go on different models.
Who owns Cursor now?
SpaceX agreed to buy Cursor for a reported $60 billion on 16 June 2026, and the deal closed on 14 August 2026. Since 12 October 2026, new users buy Cursor through SpaceXAI's "X Subscription," which shares one usage pool across Cursor, Grok and X. Existing users can keep their legacy plans.
Is a usage pool better than credits?
They're close cousins. A dollar pool ("$20 of usage") is easy to understand because customers already think in dollars, but it exposes your cost per model. Credits add a layer of abstraction that lets you set your own rate card and margin. Either works if customers can see what they've used and set a spending limit.
Can a small business learn anything from an AI company's pricing?
Plenty. Any business with a cost per use has the same problem: all-you-can-eat buffets, unlimited cleaning visits, unlimited support hours. The fix is the same too. Include a generous, clearly stated amount, price anything above it, and tell customers in plain numbers what their own bill would look like before you change anything.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- Cursor, Clarifying our pricing (4 Jul 2025)
- TechCrunch, Cursor apologizes for unclear pricing changes that upset users (7 Jul 2025)
- CNBC, AI startup Cursor raises $2.3 billion funding round at $29.3 billion valuation (13 Nov 2025)
- Cursor, Past, Present, and Future (Series D, Nov 2025)
- Dealroom, Cursor tops $4B annualized revenue (Jun 2026)
- Tech Economics, The $60 billion company with negative gross margins (11 Jun 2026)
- SpaceXAI, Introducing the X Subscription (12 Oct 2026)
- Cursor, pricing page (checked 27 Oct 2026)
- Wikipedia, SpaceXAI (acquisition dates)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.