Well, now I'm not so sure. I can reproduce this I think.
I'll open a separate bug tomorrow.  The issue I think now is that 
'check_partition_layout' is deciding that it does not need to repartition.

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https://bugs.launchpad.net/bugs/1686514

Title:
  Azure: cloud-init does not handle reformatting GPT partition ephemeral
  disks

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