I'm also taking a look in this one, I couldn't reproduce it (tried 11 times, 
with the same az-cli command-line provided by gjolly.
Found 2 interesting things after Gauthier provide me access to one of his 
failing instances:

(a) Regarding cloud-init, I see the following in the logs (comparing a
GOOD and BAD instance):

GOOD:
2021-04-13 19:19:09,341 - DataSourceAzure.py[DEBUG]: Retrieving public SSH keys
2021-04-13 19:19:09,341 - azure.py[DEBUG]: Unable to get keys from IMDS, 
falling back to OVF
2021-04-13 19:19:09,341 - DataSourceAzure.py[DEBUG]: Retrieved keys from OVF
2021-04-13 19:19:09,342 - handlers.py[DEBUG]: finish: 
azure-ds/get_public_ssh_keys: SUCCESS: get_public_ssh_keys
2021-04-13 19:19:09,342 - util.py[DEBUG]: Changing the ownership of 
/home/ubuntu/.ssh to 1000:1000
2021-04-13 19:19:09,343 - util.py[DEBUG]: Reading from /etc/ssh/sshd_config 
(quiet=False)
2021-04-13 19:19:09,343 - util.py[DEBUG]: Read 3287 bytes from 
/etc/ssh/sshd_config
2021-04-13 19:19:09,343 - util.py[DEBUG]: Writing to 
/home/ubuntu/.ssh/authorized_keys - wb: [600] 381 bytes
2021-04-13 19:19:09,343 - util.py[DEBUG]: Changing the ownership of 
/home/ubuntu/.ssh/authorized_keys to 1000:1000
2021-04-13 19:19:09,344 - util.py[DEBUG]: Changing the ownership of /root/.ssh 
to 0:0
2021-04-13 19:19:09,344 - util.py[DEBUG]: Reading from /etc/ssh/sshd_config 
(quiet=False)
2021-04-13 19:19:09,344 - util.py[DEBUG]: Read 3287 bytes from 
/etc/ssh/sshd_config
2021-04-13 19:19:09,344 - util.py[DEBUG]: Writing to /root/.ssh/authorized_keys 
- wb: [600] 545 bytes


BAD:
2021-04-12 08:25:07,412 - DataSourceAzure.py[DEBUG]: Retrieving public SSH keys
2021-04-12 08:25:07,412 - azure.py[DEBUG]: Unable to get keys from IMDS, 
falling back to OVF
2021-04-12 08:25:07,412 - azure.py[DEBUG]: No keys available from OVF
2021-04-12 08:25:07,412 - handlers.py[DEBUG]: finish: 
azure-ds/get_public_ssh_keys: SUCCESS: get_public_ssh_keys
2021-04-12 08:25:07,413 - util.py[DEBUG]: Changing the ownership of 
/home/ubuntu/.ssh to 1000:1000
2021-04-12 08:25:07,413 - util.py[DEBUG]: Reading from /etc/ssh/sshd_config 
(quiet=False)
2021-04-12 08:25:07,413 - util.py[DEBUG]: Read 3287 bytes from 
/etc/ssh/sshd_config
2021-04-12 08:25:07,414 - util.py[DEBUG]: Writing to 
/home/ubuntu/.ssh/authorized_keys - wb: [600] 0 bytes
2021-04-12 08:25:07,414 - util.py[DEBUG]: Changing the ownership of 
/home/ubuntu/.ssh/authorized_keys to 1000:1000
2021-04-12 08:25:07,414 - util.py[DEBUG]: Changing the ownership of /root/.ssh 
to 0:0
2021-04-12 08:25:07,414 - util.py[DEBUG]: Reading from /etc/ssh/sshd_config 
(quiet=False)
2021-04-12 08:25:07,415 - util.py[DEBUG]: Read 3287 bytes from 
/etc/ssh/sshd_config
2021-04-12 08:25:07,415 - util.py[DEBUG]: Writing to /root/.ssh/authorized_keys 
- wb: [600] 0 bytes

So, the main difference here is:

2021-04-13 19:19:09,341 - DataSourceAzure.py[DEBUG]: Retrieved keys from OVF
vs
2021-04-12 08:25:07,412 - azure.py[DEBUG]: No keys available from OVF

Why one method executes from DataSourceAzure.py whereas the other from azure.py?
I'm far from expert in cloud-init, so I'll defer that questions to cloud-init 
folks.

Will continue in next comment.

-- 
You received this bug notification because you are a member of Kernel
Packages, which is subscribed to linux-azure in Ubuntu.
https://bugs.launchpad.net/bugs/1919177

Title:
  Azure: issues with accelerated networking on Hirsute

Status in cloud-init:
  Incomplete
Status in cloud-init package in Ubuntu:
  New
Status in linux-azure package in Ubuntu:
  New

Bug description:
  [General]

  On Azure, when provisioning a Hirsute VM with Accelerated Networking
  enabled, sometimes the SSH key is not setup properly and the user
  cannot log into the VM.

  [how to reproduce]

  Start a VM with AN enabled:

  ```
  az vm create --name "$VM_NAME --resource-group "$GROUP" --location "UK South" 
 --image 
'Canonical:0001-com-ubuntu-server-hirsute-daily:21_04-daily-gen2:latest' --size 
Standard_F8s_v2 --admin-username ubuntu --ssh-key-value "$SSH_KEY" 
--accelerated-networking
  ```

  After a moment, try to SSH: if you succeed, delete and recreate a new
  VM.

  [troubleshooting]

  To be able to connect into the VM to debug, run:

  ```
  az vm run-command invoke -g "$GROUP" -n "$VM_NAME" --command-id 
RunShellScript --scripts "sudo -u ubuntu ssh-import-id $LP_USERNAME"
  ```

  In "/run/cloud-init/instance-data.json", I can see:
  ```
       "publicKeys": [
        {
         "keyData": "<my-pub-key>",
         "path": "/home/ubuntu/.ssh/authorized_keys"
        }
       ],
  ```

  as expected.

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https://bugs.launchpad.net/cloud-init/+bug/1919177/+subscriptions

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