A New Era for Hybrid Kubernetes and AI

Microsoft Ignite 2025 continues to accelerate Azure’s hybrid vision, extending cloud-native innovation into datacenters, factories, retail sites, and remote, fully disconnected environments. This year’s announcements expand the capabilities of AKS enabled by Azure Arc, making it the most versatile and secure platform for deploying modern applications and AI workloads across any environment.

AKS Arc now underpins Azure’s hybrid and edge strategy — and increasingly its hybrid AI strategy by delivering consistent operations, strong security, and flexible deployment models for distributed applications.

TL;DR: New AKS Arc offering and features in 2025

• AKS on Azure Local Disconnected Operations Public Preview
• AKS on Azure Local Small Form Factor Bare-Metal Private Preview
• Improvements to AKS on Azure Local Medium, including lifecycle, portability, additional GPU support and hardware support expansion.
• Improvements to AKS on Windows Server, improved platform reliability, security, and consistency through fixes to image packaging, dependency handling, node/agent synchronization, certificate and key management, error detection, telemetry and cleanup of stale resources
• 2-Node High Availability for AKS Arc at the edge Private Preview
• AI Foundry Local integration for offline/hybrid AI development
• KAITO on AKS Arc Public Preview for hybrid/edge model deployment
• Edge RAG on Azure Local Medium
• Arc Gateway for AKS Arc Public Preview
• KMS v2 for secrets encryption on AKS on Azure Local Medium
• Expanded GPU support for AKS Arc on Azure Local (RTX 6000 Ada GA, NVIDIA L-series Preview)
• AKS Container Apps on Azure Local Medium Public Preview
• AKS Edge Essentials release for improved stability and offline operations
• Arc-enabled Azure Monitor Pipeline, Workload Identity Federation, and Azure Container Storage enhancements
• Azure Linux 3.0 support, Key Vault Secret Store extension

AKS on Azure Local: Evolving the Hybrid Managed Kubernetes Platform

This year, AKS on Azure Local introduces several major enhancements that broaden where and how customers can deploy AKS as their managed Kubernetes platform at the edge.

Disconnected Operations Public Preview

AKS on Azure Local can now operate entirely offline, supporting customers in sovereign, regulated, or isolated environments. Clusters can be deployed, managed, and updated without continuous Azure connectivity, syncing only when connectivity is temporarily restored.

Small Form Factor Bare-Metal Preview

The new SFF edition brings AKS to compact industrial PCs and constrained retail or factory environments. It delivers bare-metal performance in a much smaller footprint, including optional GPU support for edge inferencing.

Improvements to Azure Local Medium

Azure Local Medium continues to mature with expanded hardware compatibility, improved lifecycle reliability, and better workload portability across cloud and local deployments — enabling enterprises to standardize on AKS across all tiers of infrastructure.

2-Node High Availability for the Edge

For space- and cost-constrained environments, AKS Arc can support HA clusters with only two nodes, enabling robust production workloads in places where traditional 3-node clusters are not feasible.

Operational Excellence with AKS Arc

Enterprises operating distributed Kubernetes fleets will benefit from new governance and connectivity capabilities.

AKS Arc Gateway Public Preview

Arc Gateway simplifies hybrid connectivity by streamlining cluster onboarding and reducing required firewall rules. This creates a more secure and operationally efficient pattern for managing large fleets of Arc-enabled clusters.

KMS v2 for Kubernetes secrets encryption at rest in etcd

KMS v2 enhances Kubernetes secret encryption for hybrid and on-prem clusters, delivering improved reliability, stronger security boundaries, and consistency with Azure’s cloud-native cryptography approach.

AKS as the Hybrid AI Application Platform

AI is the defining theme of Ignite 2025 and AKS enabled by Azure Arc is now the foundation for deploying AI where the data resides. Organizations increasingly need to run AI models in datacenters, factories, field environments, and sovereign locations, and this year’s updates establish AKS Arc as Azure’s platform for distributed and offline AI workloads.

AI Foundry Local: Build and Fine-Tune AI Models Anywhere

AI Foundry Local brings Azure AI Foundry’s core capabilities: the curated model catalog, development tools, templates, and fine-tuning support  into customer environments. It allows developers to run foundation models locally using optimized execution paths for GPUs, NPUs, and CPUs; fine-tune models with LoRA/QLoRA in regulated or offline scenarios; and package model artifacts for deployment on AKS clusters.
This enables a complete hybrid AI development loop that works both online and fully disconnected.

KAITO Public Preview on AKS Arc

KAITO automates model serving across cloud, datacenter, and edge. Now available on AKS Arc, it provides one-click packaging, optimization, and deployment of models built in AI Foundry Local. Customers can run ONNX, Hugging Face, or custom models with edge-aware performance optimization across diverse hardware, including CPU-only and GPU-accelerated nodes.

Expanded GPU Capabilities

Hybrid AI workloads benefit from expanded GPU options, including general availability of the NVIDIA RTX 6000 Ada, preview support for NVIDIA L-series GPUs, and new GPU Partitioning (GPU-PV) support for efficient resource utilization. These capabilities make it possible to run high-performance inferencing and training workloads across a wide range of hybrid deployment scenarios.

RAG on Azure Local: Bring Generative AI to On-Premises Data

RAG (Retrieval-Augmented Generation) on Azure Local enables organizations to ground AI in their own on-premises data without moving information to the cloud. Delivered as a first-party Azure Arc extension, it provides an integrated retrieval pipeline for ingesting, indexing, and querying enterprise content stored in datacenters or edge locations. With support for hybrid search, multi-modal data, evaluation tooling, and responsible AI controls, organizations can build RAG applications that remain fully compliant with data sovereignty requirements while reducing latency and improving accuracy.
By running the full RAG workflow locally — from retrieval to generation — customers can create intelligent applications that leverage proprietary documents, images, and other unstructured data directly within their secure environments.

Expanding Application Capabilities at the Edge

AKS Container Apps on the Edge

A major milestone this year is the public preview of ACA on the edge, enabling teams to bring the simplicity of Azure Container Apps to Azure Local Medium. Developers can deploy AI-powered microservices, inference endpoints, and event-driven applications at the edge using the same ACA programming model used in Azure.

AKS Edge Essentials

The latest release improves cluster stability, enhances offline lifecycle operations, and strengthens both Linux and Windows support, making it easier to operate AKS at scale in constrained or intermittently connected environments.

Enhanced Storage, Telemetry, and Security for Hybrid AI

Distributed AI workloads require robust identity, storage, and observability patterns, and Ignite brings major updates in all three areas.

• The Arc-enabled Azure Monitor Pipeline improves telemetry ingestion across disconnected or segmented networks, caching data locally and syncing to Azure when connectivity is available.
• Workload Identity Federation for Arc enables secure, secret-less identity for workloads running at the edge.
• And Azure Container Storage enabled by Arc, now expanded for AKS Arc clusters, provides a high-performance persistent storage layer suited for vector stores, embedding caches, cloud ingest and mirror.

Conclusion

Ignite 2025 represents a major step forward for AKS enabled by Azure Arc as both a hybrid Kubernetes platform and a hybrid AI application platform. With disconnected operations, edge-native Container Apps, improved GPU acceleration, KAITO for unified model serving, AI Foundry Local for offline model development, and a fully consistent operational model across cloud, datacenter, and edge, AKS Arc now enables organizations to run their most critical cloud-native and AI workloads anywhere they operate.

We look forward to continuing to support customers as they build the next generation of hybrid and edge AI applications.