Processing will occur within regional data centers, with Copilot prompts and responses processed entirely in-country to support data sovereignty.

The push responds to rising data residency and sovereignty concerns, with Gartner noting demand for regional data control as a driver.

Azure Site Recovery within Azure Local is planned to reduce downtime during outages, with dedicated EU-based Microsoft engineers supporting sovereignty and compliance efforts.

New Sovereign Cloud capabilities include Sovereign Landing Zones (SLZ) as pre-configured Azure environments to help regulated customers maintain data within geographic boundaries with enhanced security and compliance controls.

Microsoft will enable in-country data processing for Copilot interactions in 15 countries by 2026, starting with Germany, France, Norway, and the Netherlands for eligible customers by the end of 2025, and expanding to others including Canada, Italy, Brazil, the U.S., and India as part of a broader sovereignty push.

The in-country processing aims to help regulated sectors like banking, healthcare, and government meet evolving data protection rules while reducing latency and improving Copilot responsiveness.

The move is part of a broader effort to strengthen sovereign cloud capabilities and meet regulatory expectations in Europe and beyond.

It follows a revamp of Microsoft’s compliance framework and transparency measures prompted by a regulatory dispute with Nayara Energy earlier in the year.

Azure Local has expanded to support hundreds of servers and now includes Storage Area Network (SAN) integration to connect on-prem storage with cloud workloads, aiding compliance with the EU Data Act.

The announcements were made by Microsoft Specialized Clouds President and CTO Douglas Phillips in a blog post detailing expanded sovereignty features and services.

In Europe, a sovereignty governance framework has been established, including a new Belgium data center to complement existing Austria infrastructure.

Microsoft intends to continue expanding sovereignty features under a broader Sovereign Cloud roadmap, including Data Guardian and enhanced edge-over-cloud governance and disaster recovery tools.