LONDON – Microsoft updated its on-premises Azure services with the option to remove cloud connectivity for mission-critical operations. The tech giant also announced customers can run advanced large language models (LLMs) inside a fully discounted sovereign environment for the first time.

Speaking at the London leg of Microsoft’s global AI Tour, CEO Satya Nadella announced the changes as extending the firm’s sovereignty offerings, saying: “The best way to think about sovereignty is as a portfolio." With its agent factory Foundry Local now integrated with an Azul Local on-premises option, the chief proclaimed AI models can be run in local private data centers.

“[With] an AI workload you can have local AI data processing, you can use confidential computing, even on GPUs, and you can have all the key management with you. And so that basically gives you all of what is required in many of the regulations for data residency, and local processing of AI and confidentiality,” Nadella told the London audience, before announcing the option for disconnected operations in Azure Local.

“Azure Local with disconnected or hybrid operations gives you the next level of sovereignty controls that give you the optionality on that portfolio approach to managing workloads," he said. "We also have several local partners when it comes to sovereign cloud ... and this is something that we will continue to build on.”

One partner is IT and telecom solution provider Proximus Luxembourg, whose CEO Gerard Hoffmann commented: “The availability of Azure Local disconnected operations represents a breakthrough for organizations that need control over their data without sacrificing the power of the Microsoft Cloud. For Luxembourg, where digital sovereignty is not just a principle but a strategic necessity, this model offers the resilience, autonomy, and trust our market expects. By combining Microsoft’s technological leadership with [Proximus’s] sovereign cloud expertise, we are enabling our customers to innovate confidently — even in fully disconnected mode.”

With Azure Local disconnected operations, organizations are able to run and govern infrastructure entirely on-premises without any dependency on the public Azure cloud. This means management, policy enforcement, and workloads stay inside the customer environment, supporting sovereign and isolated use cases while preserving Azure-consistent operations.

Foundry Local, meanwhile, supports large multimodal AI models running on modern on-premises infrastructure, including partner GPUs such as Nvidia. Microsoft said customers will be able to perform advanced AI inferencing locally inside strict sovereign boundaries, even in fully disconnected environments.

Microsoft said Azure Local disconnected operations disconnected are now available worldwide, while large models on Foundry Local are available to qualified customers. In addition, Microsoft 365 Local disconnected is also available, bringing Exchange Server, SharePoint Server, and Skype for Business Server inside the customer’s sovereign operational boundary on Azure Local.