Azure VM Pricing: What They Don't Tell You (But You Need To Know)

View all average VM prices for Azure Regions.

4. Storage types

Storage significantly affects Azure VM costs, often in Azure ways that aren’t immediately visible. Azure offers several storage tiers:

*Selected region: West Europe
**Including IOPS and throughput fees

Using Premium storage for workloads that don’t need it drives up your VM costs, which is why you should always try to match your storage against actual needs.

5. Network interface

Finally, the network interface affects costs indirectly. Each VM has at least one NIC (network interface card), but Azure charges for outbound data transfers, not the NIC itself. Sending data outside the Azure region, or across peered regions, adds cost. Inbound traffic is generally free, but poorly architected network setups can lead to high egress charges.

Azure VM Pricing Models

When you visit Azure’s VM pricing page, you’ll notice Microsoft offers several pricing models for virtual machines. 

• Pay-As-You-Go
• Azure Savings plan for compute
• Reserved Instances
• Spot

Understanding how each works helps you avoid overspending and pick the right one for your use case. Let’s break them down:

1. Pay-As-You-Go

While prices are always indicated per month – or per hour, Microsoft actually charges their VMs per second. Meaning that, you pay only for the time when the virtual machine is running (pay for what you use) – which makes it cost-effective for more temporary tasks.

You can quit anytime and you don’t need to pay upfront or commit which is why it's the most flexible choice for provisioning VMs in Azure. 

That said, there’s a catch: with PAYG, you pay the list price, which is typically the highest price compared to other pricing models (which we will discuss next).

The D2s v3 instance costs $0.2120/hour with PAYG.

2. Reserved Instances

Azure Reservations (reserved instances) are ideal for companies with steady and long-term workloads that want to commit to a fixed number of resources for extended periods.

A VM becomes a reserved instance if the customer is committing to use a volume of specific VM series for 1 or 3 years. If you have a predictable and steady-state workload, and know you are going to need VMs for 1 or 3 years, this model can save a lot of costs. 

The longer you commit, the more you can potentially save. Discounts go up from 40% to 70% (even more if you can combine that with AHB).

Think about long-term workloads such as web hosting or a database running (a self-hosted database running onto it like this). At Intercept, we recommend it for stable, always-on applications. 

Example: Applications such as web servers that need to be running 24/7.

Looking at the D2s v3 instance, you’ll pay:

• 1 year plan: $0.1685/hour, saving 20% 
• 3 year plan: Pay 31% less: $0.1446/hour

3. Azure Spot VMs

Spot VMs are designed for flexible and interruptible workloads. These are perfect for tasks that don’t need uptime and can handle interruption. Azure Spot VMs offers discounts up to 90%. They are useful when running batch jobs or doing a test environment.

Important: Spot VMs don’t have an SLA. They are ephemeral. In other words, Microsoft can decide any moment to evict these VMs. So, plan accordingly and always have a backup plan for running such instances because these instances are only for non-critical tasks.

The price of the D2s v3 series is $0.0276/hour, which saves you 86% compared to PAYG pricing. Let that sink in…

4. Azure Free Tier

Yes, you can provision virtual machines in Azure for free. With Azure free tier, you get a free credit 30-day trial worth $200 in Azure credits.

You get 750 hours per month of free burstable VMs: B1s, B2pts v2 (Arm), and B2ats v2 (AMD). These are both for Linux and Windows, valid for 12 months.

5. Azure Hybrid Benefit

Azure Hybrid Benefit (AHB) is a pricing offer that helps to maximise the value of existing on-prem Windows Server and SQL Server licence investment while migrating to Azure. 

It allows you to bring your own licence (BYOL) to Microsoft Azure. This way, you don’t need to pay again for the OS licence normally baked in for Windows VMs in Azure.

Without using AHUB, the D8s v3 would cost $619.0400 per month (PAYG). 

However, sourcing the OS licence under AHB means paying only $350. 

Instead of paying the $269 for the Windows Server licence for an entire month running the D8 v3, you can take advantage of AHB and save a lot of money.

Azure Virtual Machine Pricing Models compared

As you’ve probably noticed, it can get complex with all the different pricing models. That’s why we’ve outlined an example of the differences between the prices for the D2s v3 Azure VM in the region West Europe:

As you can see, leveraging Azure Hybrid Benefit (AHB) with other pricing models such as reserved instances (either 1-year or 3-year) and Spot results in great cost savings.

Quick saving tips for Azure VMs

Pick the right VM size

Some VMs offer more memory, some more CPU, others come with GPU. Picking the right size or type of VM for your workload is key. Getting it right the first time might be challenging. At Intercept, our experts can help you by advising you on which VM size to choose so you don’t have to do guesswork or lose unnecessary money in the cloud.

Combine Azure Hybrid Benefit with Azure Reservations

Reserved instances can work if you use the same virtual machine size consistently in your production environment, and the sizing won’t change. But that discount only applies to the compute cost – not the Windows Server licence, which can still make up a large part of the monthly bill.

When you combine them with Azure Hybrid Benefit, you can save up to 80%.

Leverage VM Spot pricing with Azure Hybrid Benefit

Even though Spot VMs include a Windows Server licence, you still pay around 60% of the licence cost. That’s where AHB again gives you an edge. Use AHB with Spot VMs to avoid the licence cost from already-discounted pricing and get savings on non-critical workloads. 

Resize your virtual machines

Always ask yourself: Do I really need that large VM instance? Overprovisioning is a common happening. Pick the right size for your VM and resize your virtual machines based on actual usage. There are many sizes and types to choose from, each one with a different price. 

Assess your VM usage regularly, use Azure Monitor to track VM performance and identify underutilised resources. Scale the size of your VM to what you need. You might not need a large, expensive VM. Instead, consider switching to a smaller size or a more cost-effective VM family. This avoids paying for unused capacity and helps cut costs.

Enable VM autoscaling

Azure VM Scale Sets lets you automatically scale the number of VMs based on real-time demand. This helps lower costs and reduces manual effort by adding or removing instances as needed. You can set rules to scale based on:

• CPU thresholds
• Time-of-day schedules
• Custom metrics

For instance, you might scale out when CPU usage stays above 60% for 15 minutes, and scale in during off-peak hours. This setup gives you flexibility, high availability, and better cost control.

Use Spot VMs with VM Scale Sets (VMSS)

Use Spot VMs with VM Scale Sets or auto-scaling to handle variable workloads more efficiently. It’s a cost-effective way to manage demand spikes and save significantly.

Virtual Machine Scheduling

Do all your VMs need to run all the time, the whole week? Review each VM in your environment. You might be able to reduce costs by limiting runtime. Set your VM to shut down automatically at a specific time. That way, it's not running 24/7, and you avoid paying for unused hours.

Leverage Azure Free Tier

Azure Free Tier lets you explore certain Azure services at no cost, making it ideal for testing and small-scale projects. It includes limited free usage of key services, allowing you to experiment without upfront investment.

Closing thoughts

In this article, we’ve shown you how the pricing of VMs in Azure work, along with some practical examples and tips to save money with your VMs in Azure.

Read for more Azure Cost Optimisation tips to reduce your cloud bill. 

If you are considering migrating to Azure and want to explore the costs of Azure services, the Azure pricing calculator will help you calculate the costs. The tool includes all Microsoft Azure services. You select the services, and the calculator calculates the total price.

As a Microsoft partner, we at Intercept can help you with precise and detailed cost calculations.