Okay, I figured it out....we have a race condition.

What is happening is that the Windows Azure datasource starts
WALinuxAgent. WALinuxAgent normally goes off and fetches a bunch of
files. The datasource normally waits for files to show up from
WALinuxAgent. In the case of a capture, the files remain there, unless
the user removes them. The end result is that by the time WALinuxAgent
gets the files, cloud-init has consumed the previous files.

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https://bugs.launchpad.net/bugs/1269626

Title:
  cloud-init Azure Datasource does not detect new instance

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