This is tested as working on 0.7.8-49-g9e904bb-0ubuntu1~16.04.3 in xenial  in 
azure
$ cat /etc/cloud/build.info 
build_name: server
serial: 20170117
$ cat /proc/swaps 
Filename                                Type            Size    Used    Priority
/dev/sdb2                               partition       17824764        0      
-1
$ df -h /mnt2
 df -h /mnt2
Filesystem      Size  Used Avail Use% Mounted on
/dev/sdb1        33G   48M   31G   1% /mnt2
smoser@smoser0119x:~$ 


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

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https://bugs.launchpad.net/bugs/1642383

Title:
  Unable to configure swap space on ephemeral disk in Azure

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