Microsoft expands sovereign cloud with local AI services

Microsoft is adding features to its Sovereign Cloud platform for government agencies and companies in regulated industries, giving customers more control over their data and systems. The platform was first announced in June 2025.

For European customers, Data Guardian will allow a trusted EU partner to monitor certain remote access when Microsoft technicians connect to customer systems in the EU. Production Touch Ledger will record access and actions in logs designed to reveal tampering. Azure Managed HSM’s external key management is now generally available, allowing organizations to keep root encryption keys on their own hardware or with a trusted third party. A new Sovereign Control Panel in the Azure portal will show system controls, risks, gaps and dependencies.

Microsoft is also expanding Sovereign Private Cloud, based on Azure Local, for organizations running critical systems in their own environments. Services are designed to work without an internet connection; switching between connected and disconnected modes will be released as a public preview.

Two services are due to become generally available in mid-November. Foundry Local will run AI models locally and search internal data sources using natural language. GitHub Enterprise Local will let developers store code locally and use GitHub Copilot with AI models in their own environment. Both are designed to work offline.

Microsoft says it is extending confidential computing on Azure Local. SQL Server on Azure Local is already available; DocumentDB and Blob Storage are planned as public previews. Microsoft 365 Local is in preview for approved customers and can connect to locally hosted SharePoint and Exchange servers. Microsoft named 29 partners, including Bleu, Delos Cloud, Mistral, Nvidia and Dell.