Discover Azure Pricing in 2025: What You Need to Know!

Storage

Storing data in the cloud isn't free - it depends on how much, what type of data, where, and how you store it. A gigabyte is less expensive than a petabyte, but pricing also varies by storage tier, redundancy level, and size.

The higher the storage capacity of a service, the more you pay. In some cases, you can choose both capacity and performance levels, which will influence the total cost.

Storage pricing in Azure depends on both:

• Performance tiers (standard or premium)
• Access tiers (hot, cool, cold, or archive).

Choosing the cheapest tier without considering access frequency can end up costing more.

Nonetheless, only a tiny percentage comes from storage (except for when you store massive amounts of data). Compute accounts for the greatest share of costs in Azure.

Network Traffic/Bandwidth

Bandwidth refers to how much data moves in and out of Azure. This can significantly impact the costs of your Azure environment.

When migrating to Azure, your company will likely upload data from on-prem servers to an Azure data centre. This upload, known as ingress (inbound traffic) is usually free. However, egress (outbound traffic) – data leaving Azure is not free and is subject to charges.

The rule of thumb is as follows: data transfer within a region, such as between your VMs or from an App Service to an SQL Database is free since its internal communication. However, moving data between regions, like from the West US to the East US, incurs costs.

If your applications require global scaling and large data transfers, it's worth reviewing Microsoft's bandwidth pricing page to understand how different scenarios impact costs.

Location

When purchasing Azure services, the region of choice affects the price. 

For example: a virtual machine in Western Europe may be available for a different amount in North Europe – despite having the same configuration. 

This price variation exists across many regions due to differences in data centre operational costs. Getting into the exact factors would be complex, but think of infrastructure expenses like:

• Power
• Labour
• Land costs
• Taxes and regulations

And these are just some of the factors affecting Azure pricing.

When choosing an Azure region, select one close to your customers to keep latency low, especially for production workloads. Ensure it offers all your services and comes at the best price.

Purchase models in Azure

There are multiple ways to procure Azure services. All Microsoft purchase models have advantages and disadvantages and offer unique pricing and billing cycles.

• Pay-As-You-Go, direct (credit card): This purchase model is the easiest way to purchase Microsoft cloud services as you only have to go to Microsoft’s website, select your products, link your credit card and pay. While it works for temporary workloads, you always fall into the highest price category with a credit card as you pay the list price.
• Enterprise Agreement (EA): A contract between businesses and Microsoft that allows for volume discounts and negotiated pricing based on long-term commitments (3 years). Mostly attractive for larger enterprises who prefer central purchasing.
• Cloud Solution Provider (CSP): CSP is a subscription model that allows businesses to purchase Azure through Microsoft partners. This is often the cheapest and best option, as you only pay for what you use (without commitments). With CSP, you can scale quickly and easily. Besides, a CSP partner often offers discounted pricing, which applies across all Azure services in your subscription.
• Microsoft Azure Consumption Commitment (MACC): A program where organisations commit to a specific spending level over a set period in exchange for discounted pricing and additional benefits.

Remember: every resource type has a small metric that tracks its usage, and this will be the key factor affecting the final cost of your Azure environment.

Licencing

Another thing that costs money in the cloud is software licences. When you create an Azure virtual machine, it has a licence for the operating system that runs in that VM, which costs money. You can mitigate some of these costs if you already have your licences with Software Assurance or are running your workloads on Dev/Test subscriptions.

Azure Free Tier

If you are new to Azure or if you want to run an experiment on Azure, you probably wonder: “Can I use Azure for free?”

The answer = yes! You can use Microsoft Azure for free for 12 months. So, what do you get for free?

12 Months Free Use

Microsoft Azure’s free tier includes 12 months of free access to select services with usage limits.

Also, there are many Azure services you can always use for free because they have a free tier. You can, for instance, use a Linux VM for free for 750 hours. 

The table below is a breakdown of popular Azure services eligible in the free tier:

Credit for the First 30 Days

Microsoft also provides you with a credit of $200 for additional services in the first 30 days. You can spend this on services not included in the free list or if you use more than the free service limits permit. Beyond that point, any extra use of Azure services will come with a price tag.

Is Azure Free Forever?

You can also use many services for free, as long as you like. Currently, there are more than 60 services that you can always use for free. This is great for trying things out and running small projects in Azure.

Note, you are billed for the Azure resources consumed while using free services. For example, Azure Kubernetes Service (AKS) is free, but you still pay for the virtual machines or container instances it deploys.

The table below is a breakdown of popular Azure services eligible in the free tier:

As you can see in the table above, while services are free for life, they do have limitations. Check out all free Azure Services. 

If you don’t move your trial to a Pay-As-You-Go subscription, whenever you spend your $200 in credit or at the end of your 30 days (whichever comes first), your free trial will expire, and:

• The resources you deployed to your Azure subscription will be decommissioned.
• You won’t be able to access them anymore.
• You won’t be billed for anything.

What are the pricing options for Microsoft Azure?

Microsoft Azure provides three main payment options for Azure VMs and cloud resources:

• Pay-As-You-Go (not to be confused with a PAYG subscription)
• Reserved Instances
• Spot Pricing

All of these Azure pricing models cater to various business needs and scenarios.

Pay-As-You-Go

The pay-as-you-go (PAYG) model is an easy way to start using Microsoft cloud services. With PAYG, users only pay for each Azure service based on actual usage. Depending on the resource, you get billed per minute or hour.

The upside is that you don’t need pre-commitment and can start or stop services anytime, scaling up and down as you like. This makes it interesting for dynamic organisations with changing business needs.

However, it’s crucial to remember that you can run into variable costs, leading to unpredictable – and high expenses. Besides, with pay-as-you-go, you pay the list price, which is always the highest.

The pay-as-you-go model is best for:

• Businesses that prefer operational over capital expenditures
• Development environments
• Short-term workloads and testing

Azure Reservations

Azure Reservations allow users to commit to a specific virtual machine type and size for a fixed term, 1 or 3 years. In exchange, you get discounted pricing often up to 72% (compared to standard PAYG terms) or that commitment. The longer you commit, the more you can potentially save.

Microsoft allows you to exchange reserved instances for different ones during the commitment term. You can also cancel a reservation before it ends (up to $50000 per rolling 12-month period).

Microsoft doesn't currently apply an early termination fee, but it may choose to enable this in the future. 

Unused reserved hours are not carried forward if no matching resources are available. In other words, the reserved capacity goes lost. 

This pricing model works best for:

• Applications with consistent usage
• Fixed budgets
• Production environments
• Large databases
• Always on, steady-state applications, etc

Azure Savings Plan

The Azure Savings Plan for compute is an easy and flexible way to save on your cloud compute costs by committing to spending a fixed hourly amount for one or three years.

In contrast to Azure Reservations, it applies discounts automatically across Azure compute services globally, without locking you into specific VM types or regions. All in all, this can result in significant savings compared to PAYG prices.

Moreover, you have flexibility in purchasing and configuring your plan and applying the savings. Save regardless of region, instance series, or OS, automatically applying the highest available discounts first. Generally, it’s best for businesses with dynamic workloads or evolving compute needs, whether planned or unplanned.

However, Savings Plans cannot be cancelled or exchanged for reservations.

Azure Discount Models

Spot Virtual Machines

Azure Spot VMs are a pricing offshoot of a regular Azure VM, offering discounts of up to 90% compared to pay-as-you-go pricing. These VMs use Azure’s unused capacity.

However, Azure can terminate these instances at any time if that unused capacity is needed elsewhere. In other words, Spot Pricing is cost-effective but comes with no guarantees.

It operates on a bidding system where you set a maximum price for instances, making it ideal for workloads that can handle sudden interruptions.

Spot Instances are suited for:

• Batch processing
• Data analysis
• Non-critical development
• Test environments

Spot Instances also work well when combined with automation for scaling and job rescheduling.

Azure Hybrid Benefit

As you now know, software licences are a significant cost factor in the cloud. SQL Server and Windows OS licences can be quite expensive.

This is where Azure Hybrid Benefit comes in. It lets you bring your SQL Server or Windows Server licence to Azure, also known as bring your own licence (BYOL). Thus, you avoid paying for it again.

Savings can get as far as 85% over standard pay-as-you-go pricing!  There are similar Linux-based benefits for those with Red Hat or SUSE subscription services.

Azure Dev/Test Pricing

If you have a Visual Studio subscription, it includes Azure benefits. Depending on your Visual Studio tier, you get free monthly credits – around $150 USD per month.

You can spend that on Dev/Test resources in Azure. This is a great way to reduce costs for development environments.

Azure Dev/Test labs allow you to template specific virtual machine setups or environments and then enable others (developers) to select that template for deployment in Azure. Once testing wraps up, the environment deletes itself, so you don’t pay for something you don’t need.

In fact, you can save as much on Azure PaaS services like:

• Discounts ranging around 40% for non-premium tiers of App Services
• Saving up to 55% on SQL Database App Service
• For Azure Logic Apps, savings can reach up to 50%

Azure Compute Pricing

Azure Virtual Machine (VM) Pricing

Microsoft Azure has many virtual machines in a wide range of types and sizes, such as:

1. General purpose VMs
2. Compute-optimised VMs
3. Memory-optimised VMs
4. Storage-optimised VMs
5. Accelerated VMs (GPU/FPGA)
6. High-performance computing VMs (with RDMA network connections)

Take time to understand your workload and determine whether it’s skewed towards storage, CPU, or memory. Or maybe it’s a general-purpose workload? Then, find the VM tier and type fits best.

Now, let’s lay out an example of prices for Windows VMs in East US with pay-as-you-go pricing:

Check the latest pricing for Windows VMs and also Linux VMs (Linux VMs cost less as they often don’t have a the licensing cost).

Azure Kubernetes Service (AKS)

If you’re thinking about using containers, Azure Kubernetes Service (AKS) is the go-to option. While AKS itself is free, you pay for what it runs on – the compute, storage, and networking resources your Kubernetes cluster consumes. The more resources your cluster uses, the higher the cost.

For example, a D2 series VM costs around $0.15 per hour. But actual costs vary by VM type and configuration.

Azure Functions Pricing

Azure Functions follows a serverless pricing model, charging based on the number of executions and the compute time consumed each month. 

• Executions: The first 1,000,000 executions are free of charge. After that, you’ll get charged $0,20 per million executions.
• Execution time: Free monthly grant of 400,000 GB-seconds (great for small workloads). Beyond this, usage is billed at $0.000016 per GB-second.

There are currently three types of hosting plans for an app running on Azure Functions, each with its own pricing model:

• Consumption Plan: Pay only for execution time. Includes a free grant per subscription. Best for event-driven apps with unpredictable usage.
• Premium Plan: Similar to the Consumption Plan but with better performance, VNet access, and fixed pricing based on the selected tier. Ideal for high-performance, scalable apps needing dedicated resources.
• Dedicated (App Service) Plan: Runs on a dedicated VM or isolated environment, allowing custom images and full VM control. Best for long-running processes or custom compute needs.

For a detailed cost breakdown, check Microsoft’s Functions pricing page.

Azure Storage Pricing

With Azure Storage, you get massive scalability for object storage, a reliable file system, secure messaging, and a NoSQL store, built for durability and availability. 

Azure Storage pricing varies as each service has its own pricing model. The most known are Azure Blob Storage and Azure Files.

Azure Blob Storage

Azure Storage scales infinitely, with pricing reducing as volume grows. Pricing starts from $0.00099 per GB for the Archive tier and reaches up to $0.15 per GB for the Premium tier (only for first 50TB).

Azure Files

Azure Files is a cloud-based file sharing service that supports SMB and NFS protocols, making it easy to migrate and integrate on-premises applications.

Azure Files pricing starts at:

• $0.0228 per GiB/month for the Cool tier
• $0.0287 per GiB/month for the Hot tier
• $0.0600 per GiB/month for Transaction Optimized storage (depending on access frequency and performance needs).

Extra fees apply for snapshots, data transactions, and transfer volume, adding to your cloud bill.

You can also save on storage costs with Azure Reserved Capacity by committing to long-term storage plans of 1 or 3 years. What’s more, you must consider operational costs like per-10,000 write request charges and data egress fees. 

Note that prices are subject to change, and the region selected for this example is East US with LRS redundancy. Checkout the official pricing page of Azure Blob Storage Pricing and Azure Files Pricing.

Azure Networking Pricing

Networking is a major part of your Azure costs, regardless which service you use, they’ll always be there.

Virtual Network Pricing

Azure Virtual Network (VNet) lets you create a private network in the cloud. It is free to a limit of 1,000 VNets per subscription. However, VNet Peering incurs charges for inbound and outbound traffic at both ends. 

Same region Peering is more affordable, costing as much as $0.01 per GB.

Costs of VNET Peering within the same region:

• Global VNet peering is cheapest in the US and Europe ($0.035/GB)
• Higher in Australia and Asia ($0.09/GB)
• And most costly in South America and Africa ($0.16/GB)

Additionally, network appliances like VPN Gateway and Application Gateway running inside a VNet incur extra charges.

VPN Gateway Pricing

Azure VPN Gateway provides secure cross-premises connectivity between your Azure VNet and on-prem infrastructure while enabling encrypted communication over the internet.

While creating a Virtual Network (VNet) is free, VPN Gateway incurs charges based on its provisioning time and availability. Costs depend on the gateway SKU and the amount of data transferred.

Pricing starts from $0.04 per hour for a bandwidth of 100 Mbps, max 10 S2S Tunnels and max 128 P2S Tunnels. Compare VPN options and pricing in the chart below.

Azure Bandwidth Pricing

Bandwidth is another networking cost you’ll likely face in your Azure subscription. Bandwidth includes data transfer into and out of Azure data centres and data moving between them.

Data coming into (inbound data) Azure is always free, but sending data out (outbound data) isn’t.

The first 5 GB per month are free, after which charges apply. Organisations tend to overlook bandwidth costs in their monthly estimates, resulting in unexpected charges.

Closing thoughts

In the end, the price you pay in Azure depends on many factors, as we’ve discussed here. If you want to get a sense of how much you will pay in Microsoft Azure, use the Azure Pricing Calculator. With this free tool, you can calculate the costs (an estimate) of various Azure products and services to see how much it will cost when moving workloads to Azure.

If you're looking for ways to cut down costs in Azure, check out these Azure Cost Optimisation Tips.