Azure Integrated HSM: New Chapter&Shift from Centralized Clusters to Embedded Silicon-to-Cloud Trust

Azure Integrated HSM marks a major shift in how cryptographic keys are handled—moving from centralized clusters… to local, tamper‑resistant modules embedded directly in virtual machines.
This new model brings cryptographic assurance closer to the workload, reducing latency, increasing throughput, and redefining what’s possible for secure applications in the cloud.

Before diving into this innovation, let’s take a step back. Microsoft’s journey with HSMs in Azure spans nearly a decade, evolving through multiple architectures, vendors, and compliance models. From shared services to dedicated clusters, from appliance‑like deployments to embedded chips, each milestone reflects a distinct response to enterprise needs and regulatory expectations.

Let’s walk through that progression — not as a single path, but as a layered portfolio that continues to expand.

Azure Key Vault Premium, with nCipher nShield

Around 2015, Microsoft made Azure Key Vault generally available, and soon after introduced the Premium tier, which integrated nCipher nShield HSMs (previously part of Thales, later acquired by Entrust). This was the first time customers could anchor their most sensitive cryptographic material in FIPS 140‑2 Level 2 validated hardware within Azure.

Azure Key Vault Premium is delivered as a fully managed PaaS service, with HSMs deployed and operated by Microsoft in the backend. The service is redundant and highly available, with cryptographic operations exposed through Azure APIs while the underlying HSM infrastructure remains abstracted and secure.

This enabled two principal cornerstone scenarios. Based on the Customer Encryption Key (CEK) model, customers could generate and manage encryption keys directly in Azure, always protected by HSMs in the backend. Going further with the Bring Your Own Key (BYOK) model, organizations could generate keys in their own on‑premises HSMs and then securely import and manage them into Azure Key Vault–backed HSMs.

These capabilities were rapidly adopted across Microsoft’s second-party services. For example, they underpin the master key management for Azure RMS, later rebranded as Azure Information Protection, and now part of Microsoft Purview Information Protection. These HSM-backed keys can protect the most sensitive data if customers choose to implement the BYOK model through Sensitivity Labels, applying encryption and strict usage controls to protect highly confidential information. Other services like Service Encryption with Customer Key allow customers to encrypt all their data at rest in Microsoft 365 using their own keys, via Data Encryption Policies. This applies to data stored in Exchange, SharePoint, OneDrive, Teams, Copilot, and Purview. This approach also applies to Power Platform, where customer-managed keys can encrypt data stored in Microsoft Dataverse, which underpins services like Power Apps and Power Automate.

Beyond productivity services, Key Vault Premium became a building block in hybrid customer architectures: protecting SQL Server Transparent Data Encryption (TDE) keys, storing keys for Azure Storage encryption or Azure Disk Encryption (SSE, ADE, DES), securing SAP workloads running on Azure, or managing TLS certificates for large‑scale web applications. It also supports custom application development and integrations, where cryptographic operations must be anchored in certified hardware — whether for signing, encryption, decryption, or secure key lifecycle management.

Around 2020, Azure Key Vault Premium benefit from a shift away from the legacy nCipher‑specific BYOK process. Initially, BYOK in Azure was tightly coupled to nCipher tooling, which limited customers to a single vendor. As the HSM market evolved and customers demanded more flexibility, Microsoft introduced a multi‑vendor BYOK model. This allowed organizations to import keys from a broader set of providers, including Entrust, Thales, and Utimaco, while still ensuring that the keys never left the protection of FIPS‑validated HSMs. This change was significant: it gave customers freedom of choice, reduced dependency on a single vendor, and aligned Azure with the diverse HSM estates that enterprises already operated on‑premises.

Azure Key Vault Premium remains a cornerstone of Azure’s data protection offerings. It’s widely used for managing keys, secrets (passwords, connection strings), and certificates. Around February 2024 then with a latest firmware update in April 2025, Microsoft and Marvel has announced the modernization of the Key Vault HSM backend to meet newer standards: Azure’s HSM pool has been updated with Marvell LiquidSecurity adapters that achieved FIPS 140-3 Level 3 certification. This means Key Vault’s underpinnings are being refreshed to the latest security level, though the service interface for customers remains the same. [A tip for Tech guys: you can check the HSM backend provider by looking at the FIPS level in the "hsmPlatform" key attribute]. Key Vault Premium continues to be the go-to solution for many scenarios where a fully managed, cloud-integrated key manager with a shared HSM protection is sufficient.

Azure Dedicated HSM, with SafeNet Luna

In 2018, Microsoft introduced Azure Dedicated HSM, built on SafeNet Luna hardware (originally Gemalto, later part of Thales). These devices were validated to FIPS 140‑2 Level 3, offering stronger tamper resistance and compliance guarantees.

This service provided physically isolated HSM appliances, deployed as single-tenant instances within a customer’s virtual network. By default, these HSMs were non-redundant, unless customers explicitly provisioned multiple units across regions. Each HSM was connected to a private subnet, and the customer retained full administrative control over provisioning, partitioning, and policy enforcement. Unlike Key Vault, using a Dedicated HSM meant the customer had to manage a lot more: HSM user management, key backup (if needed), high availability setup, and any client access configuration.

Dedicated HSM was particularly attractive to regulated industries such as finance, healthcare, and government, where compliance frameworks demanded not only FIPS‑validated hardware but also the ability to define their own cryptographic domains and audit processes.

Over time, however, Microsoft evolved its HSM portfolio toward more cloud‑native and scalable services. Azure Dedicated HSM is now being retired: Microsoft announced that no new customer onboardings are accepted as of August 2025, and that full support for existing customers will continue until July 31, 2028. Customers are encouraged to plan their transition, as Azure Cloud HSM will succeed Dedicated HSM.

Azure Key Vault Managed HSM, with Marvell LiquidSecurity

By 2020, it was evident that Azure Key Vault (with shared HSMs) and Dedicated HSM (with single-tenant appliances) represented two ends of a spectrum, and customers wanted something in between: the isolation of a dedicated HSM and the ease-of-use of a managed cloud service.

In 2021, Microsoft launched Azure Key Vault Managed HSM, a fully managed, highly available service built on Marvell LiquidSecurity adapters, validated to FIPS 140‑3 Level 3.

The key difference with Azure Key Vault Premium lies in the architecture and assurance model. While AKV Premium uses a shared pool of HSMs per Azure geography, organized into region-specific cryptographic domains based on nShield technology — which enforces key isolation through its Security World architecture — Managed HSM provides dedicated HSM instances per customer, ensuring stronger isolation.

Also delivered as a PaaS service, it is redundant by design, with built‑in clustering and high availability across availability zones; and fully managed in terms of provisioning, configuration, patching, and maintenance. Managed HSM consists of a cluster of multiple HSM partitions, each based on a separate customer-specific security domain that cryptographically isolates every tenant.

Managed HSM supports the same use cases as AKV Premium — CEK, BYOK for Azure RMS or SEwCK, database encryption keys, or any custom integrations — but with higher assurance, stronger isolation, and FIPS 140‑3 Level 3 compliance.

Azure Payment HSM, with Thales payShield 10K

Introduced in 2022, Azure Payment HSM is a bare-metal, single-tenant service designed specifically for regulated payment workloads. Built on Thales payShield 10K hardware, it meets stringent compliance standards including FIPS 140-2 Level 3 and PCI HSM v3.

Whereas Azure Dedicated HSM was built for general-purpose cryptographic workloads (PKI, TLS, custom apps), Payment HSM is purpose-built for financial institutions and payment processors, supporting specialized operations like PIN block encryption, EMV credentialing, and 3D Secure authentication.

The service offers low-latency, high-throughput cryptographic operations in a PCI-compliant cloud environment. Customers retain full administrative control and can scale performance from 60 to 2500 CPS, deploying HSMs in high-availability pairs across supported Azure regions.

Azure Cloud HSM, with Marvell LiquidSecurity

In 2025, Microsoft introduced Azure Cloud HSM, also based on Marvell LiquidSecurity, as a single‑tenant, cloud‑based HSM cluster. These clusters offer a private connectivity and are validated to FIPS 140‑3 Level 3, ensuring the highest level of assurance for cloud‑based HSM services.

Azure Cloud HSM is now the recommended successor to Azure Dedicated HSM and gives customers direct administrative authority over their HSMs, while Microsoft handles availability, patching, and maintenance. It is particularly relevant for certificate authorities, payment processors, and organizations that need to operate their own cryptographic infrastructure in the cloud but do not want the burden of managing physical hardware. It combines sovereignty and isolation with the elasticity of cloud operations, making it easier for customers to migrate sensitive workloads without sacrificing control.

A single Marvell LiquidSecurity2 adapter can manage up to 100,000 key pairs and perform over one million cryptographic operations per second, making it ideal for high-throughput workloads such as document signing, TLS offloading, and PKI operations.

In contrast to Azure Dedicated HSM, Azure Cloud HSM simplifies deployment and management by offering fast provisioning, built-in redundancy, and centralized operations handled by Microsoft. Customers retain full control over their keys while benefiting from secure connectivity via private links and automatic high availability across zones — without the need to manually configure clustering or failover.

Azure Integrated HSM, with Microsoft Custom Chips

In 2025, Microsoft finally unveiled Azure Integrated HSM, a new paradigm, shifting from a shared cryptographic infrastructure to dedicated, hardware-backed modules integrated at the VM level: custom Microsoft‑designed HSM chips are embedded directly into the host servers of AMD v7 virtual machines. These chips are validated to FIPS 140‑3 Level 3, ensuring that even this distributed model maintains the highest compliance standards.

This innovation allows cryptographic operations to be performed locally, within the VM boundary. Keys are cached securely, hardware acceleration is provided for encryption, decryption, signing, and verification, and access is controlled through an oracle‑style model that ensures keys never leave the secure boundary.

The result is a dramatic reduction in latency and a significant increase in throughput, while still maintaining compliance. This model is particularly well suited for TLS termination at scale, high‑frequency trading platforms, blockchain validation nodes, and large‑scale digital signing services, where both performance and assurance are critical.

Entered public preview in September 2025, Trusted Launch must be enabled to use the feature, and Linux support is expected soon. Microsoft confirmed that Integrated HSM will be deployed across all new Azure servers, making it a foundational component of future infrastructure.

Azure Integrated HSM also complements Azure Confidential Computing, allowing workloads to benefit from both in-use data protection through hardware-based enclaves and key protection via local HSM modules. This combination ensures that neither sensitive data nor cryptographic keys ever leave a secure hardware boundary — ideal for high-assurance applications.

 

Figure 1: Azure Integrated HSM model

A Dynamic Vendor Landscape

The vendor story behind these services is almost as interesting as the technology itself. Thales acquired nCipher in 2008, only to divest it in 2019 during its acquisition of Gemalto, under pressure from competition authorities. The buyer was Entrust, which suddenly found itself owning one of the most established HSM product lines. Meanwhile, Gemalto’s SafeNet Luna became part of Thales — which would also launch the Thales payShield 10K in 2019, leading PCI-certified payment HSM — and Marvell emerged as a new force with its LiquidSecurity line, optimized for cloud-scale deployments.

Microsoft has navigated these shifts pragmatically, adapting its services and partnerships to ensure continuity for customers while embracing the best available hardware. Looking back, it is almost amusing to see how vendor mergers, acquisitions, and divestitures reshaped the HSM market, while Microsoft’s offerings evolved in lockstep to give customers a consistent path forward.

Comparative Perspective

Looking back at the evolution of Microsoft’s HSM integrations and services, a clear trajectory emerges: from the early days of Azure Key Vault Premium backed by certified HSMs (still active), completed by Azure Key Vault Managed HSM with higher compliance levels, through the Azure Dedicated HSM offering, replaced by the more cloud‑native Azure Cloud HSM, and finally to the innovative Azure Integrated HSM embedded directly in virtual machines.

Each step reflects a balance between control, management, compliance, and performance, while also adapting to the vendor landscape and regulatory expectations.

Microsoft’s strategy shows an understanding that different customers have different requirements on the spectrum of control vs convenience. So Azure didn’t take a one-size-fits-all approach; it built a portfolio:

-          Use Azure Key Vault Premium if you want simplicity and can tolerate multi-tenancy.

-          Use Azure Key Vault Managed HSM if you need sole ownership of keys but want a turnkey service.

-          Use Azure Payment HSM if you operate regulated payment workloads and require PCI-certified hardware.

-          Use Azure Cloud HSM if you need sole ownership and direct access for legacy apps.

-          Use Azure Integrated HSM if you need ultra-low latency and per-VM key isolation, for the highest assurance in real-time.

Beyond the HSM: A Silicon-to-Cloud Security Architecture by Design

Microsoft’s HSM evolution is part of a broader strategy to embed security at every layer of the cloud infrastructure — from silicon to services. This vision, often referred to as “Silicon-to-Cloud”, includes innovations like Azure Boost, Caliptra, Confidential Computing, and now Azure Integrated HSM.

Azure Confidential Computing plays a critical role in this architecture. As mentioned, by combining Trusted Execution Environments (TEEs) with Integrated HSM, Azure enables workloads to be protected at every stage — at rest, in transit, and in use — with cryptographic keys and sensitive data confined to verified hardware enclaves. This layered approach reinforces zero-trust principles and supports compliance in regulated industries.

With Azure Integrated HSM installed directly on every new server, Microsoft is redefining how cryptographic assurance is delivered — not as a remote service, but as a native hardware capability embedded in the compute fabric itself. This marks a shift from centralized HSM clusters to distributed, silicon-level security, enabling ultra-low latency, high throughput, and strong isolation for modern cloud workloads.

 

Figure 2: Building blocks of Azure's hardware security Architecture

Resources

To go a bit further, I invite you to check out the following articles and take a look at the related documentation.

• Protecting Azure Infrastructure from silicon to systems | Microsoft Azure Blog by Mark Russinovich, Chief Technology Officer, Deputy Chief Information Security Officer, and Technical Fellow, Microsoft Azure, Omar Khan, Vice President, Azure Infrastructure Marketing, and Bryan Kelly, Hardware Security Architect, Microsoft Azure

• Microsoft Azure Introduces Azure Integrated HSM: A Key Cache for Virtual Machines | Microsoft Community Hub by Simran Parkhe
• Securing Azure infrastructure with silicon innovation | Microsoft Community Hub by Mark Russinovich, Chief Technology Officer, Deputy Chief Information Security Officer, and Technical Fellow, Microsoft Azure

About the Author

I'm Samuel Gaston-Raoul, Partner Solution Architect at Microsoft, working across the EMEA region with the diverse ecosystem of Microsoft partners—including System Integrators (SIs) and strategic advisory firms, Independent Software Vendors (ISVs) / Software Development Companies (SDCs), and Startups. I engage with our partners to build, scale, and innovate securely on Microsoft Cloud and Microsoft Security platforms.

With a strong focus on cloud and cybersecurity, I help shape strategic offerings and guide the development of security practices—ensuring alignment with market needs, emerging challenges, and Microsoft’s product roadmap. I also engage closely with our product and engineering teams to foster early technical dialogue and drive innovation through collaborative design.

Whether through architecture workshops, technical enablement, or public speaking engagements, I aim to evangelize Microsoft’s security vision while co-creating solutions that meet the evolving demands of the AI and cybersecurity era.

 

Figure 3: Picture of the author