Cloud-init will reset hostname on every reboot. The hostname is stored
in /var/lib/waagent/ovf-env.xml.

You could use the following command to change your hostname.
       sudo sed -e "s/your-old-hostname/your-new-hostname/" -i 
/var/lib/waagent/ovf-env.xml

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https://bugs.launchpad.net/bugs/1375252

Title:
  Hostname change is not preserved across reboot on Azure Ubuntu VMs

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