This bug was fixed in the package cloud-init - 0.7.8-3-g80f5ec4-0ubuntu1

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cloud-init (0.7.8-3-g80f5ec4-0ubuntu1) yakkety; urgency=medium

  * New upstream snapshot.
    - Adjust mounts and disk configuration for systemd. (LP: #1611074)
    - dmidecode: run dmidecode only on i?86 or x86_64 arch. [Robert Schweikert]

 -- Scott Moser <smo...@ubuntu.com>  Tue, 20 Sep 2016 13:59:20 -0400

** Changed in: cloud-init (Ubuntu)
       Status: Confirmed => Fix Released

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https://bugs.launchpad.net/bugs/1611074

Title:
  Reformatting of ephemeral drive fails on resize of Azure VM

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