Terraform with Azure Integration
By Pooja | 22nd Aug 2025
Introduction
Microsoft Azure is one of the leading cloud platforms used by enterprises worldwide. It provides services for compute, networking, storage, databases, AI, DevOps, and security. While the Azure Portal and Azure CLI allow you to manage resources, they are often not ideal for large-scale, automated, and repeatable deployments.
This is where Terraform, an open-source Infrastructure as Code (IaC) tool from HashiCorp, plays a key role. Terraform allows you to define, provision, and manage Azure resources in code, ensuring consistency, automation, and scalability.
By integrating Terraform with Azure, organizations gain:
- Automated provisioning of Azure resources.
- Faster deployment with reusable templates.
- Consistent infrastructure across dev, test, and prod.
- Multi-cloud capabilities beyond Azure.
More Deep into this topic Infrastructure as Code (IaC) in Terraform
Why Use Terraform with Azure?
Azure already has its own IaC tool (ARM templates and Bicep), so why Terraform?
- Multi-Cloud Support → Terraform works with Azure, AWS, GCP, Kubernetes, and more.
- Declarative Syntax → Write the desired state, and Terraform ensures Azure matches it.
- Readable HCL Language → Easier to use than JSON in ARM templates.
- State Management → Keeps track of resources created in Azure.
- Reusable Modules → Reduce duplication and maintain consistency.
- Community Modules → Access pre-built Terraform modules for Azure in the Terraform Registry.
Azure Provider in Terraform
Terraform integrates with Azure through the Azure Provider (azurerm).
Example Azure Provider Configuration:
provider “azurerm” {
 features {}
 subscription_id = “your-subscription-id”
 client_id      = “your-service-principal-client-id”
 client_secret  = “your-service-principal-secret”
 tenant_id      = “your-tenant-id”
}
Authentication Options:
- Azure CLI (Recommended): Login via az login.
- Service Principal: Authenticate with client_id, client_secret, and tenant_id.
- Managed Identity: For Terraform running inside Azure VM.
Terraform Workflow with Azure
Terraform with Azure follows the same workflow as other providers:
- Install Terraform → Download and install.
- Authenticate with Azure → Using CLI, Service Principal, or Managed Identity.
- Write Configuration Files → Define Azure resources in .tf files.
- Initialize → Run terraform init to install the Azure provider.
- Plan → Run terraform plan to preview changes.
- Apply → Run terraform apply to provision Azure resources.
- Destroy → Run terraform destroy to remove resources.
Basic Example: Creating an Azure Resource Group
A Resource Group is a container for resources in Azure.
Code (main.tf):
provider “azurerm” {
 features {}
}
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resource “azurerm_resource_group” “rg” {
 name    = “terraform-rg”
 location = “East US”
}
Steps:
- Save this as main.tf.
- Run terraform init.
- Run terraform plan.
- Run terraform apply.
Terraform provisions a Resource Group in Azure.
Common Azure Resources Managed by Terraform
Terraform can manage nearly all Azure resources:
- Compute → Virtual Machines, VM Scale Sets.
- Networking → Virtual Networks, Subnets, NSGs, Load Balancers.
- Storage → Blob Storage, Managed Disks, File Shares.
- Databases → Azure SQL, Cosmos DB, PostgreSQL.
- IAM → Role Assignments, Managed Identities.
- Containers → AKS (Azure Kubernetes Service).
- Monitoring & Security → Application Insights, Azure Security Center.
Advanced Example: Virtual Network and Subnet
provider “azurerm” {
 features {}
}
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# Resource Group
resource “azurerm_resource_group” “rg” {
 name    = “terraform-network-rg”
 location = “East US”
}
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# Virtual Network
resource “azurerm_virtual_network” “vnet” {
 name               = “terraform-vnet”
 address_space      = [“10.0.0.0/16”]
 location           = azurerm_resource_group.rg.location
 resource_group_name = azurerm_resource_group.rg.name
}
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# Subnet
resource “azurerm_subnet” “subnet1” {
 name                = “terraform-subnet”
 resource_group_name = azurerm_resource_group.rg.name
 virtual_network_name = azurerm_virtual_network.vnet.name
 address_prefixes    = [“10.0.1.0/24”]
}
This creates a Resource Group, Virtual Network, and a Subnet.
Using Variables in Azure Terraform
Variables make configurations reusable.
variable “location” {
 default = “East US”
}
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resource “azurerm_resource_group” “rg” {
 name    = “terraform-variable-rg”
 location = var.location
}
Now you can easily change locations without editing every resource.
Remote State in Azure
Terraform uses a state file to track resources. In teams, you should use remote state storage.
Example: Azure Blob Storage Backend
terraform {
 backend “azurerm” {
   resource_group_name  = “terraform-backend-rg”
   storage_account_name = “tfstatestorage123”
   container_name       = “tfstate”
   key                  = “terraform.tfstate”
 }
}
This ensures the state file is stored securely in Azure Storage, supporting collaboration.
Terraform Azure Modules
Terraform provides Azure modules for common setups.
Example: Azure Virtual Network Module
module “vnet” {
 source             = “Azure/network/azurerm”
 version            = “3.0.0”
 resource_group_name = “terraform-vnet-rg”
 location           = “East US”
 address_space      = [“10.1.0.0/16”]
 subnet_prefixes    = [“10.1.1.0/24”]
 subnet_names       = [“subnet1”]
}
Using modules makes code simpler, reusable, and scalable.
Best Practices for Azure with Terraform
- Use Service Principals or Managed Identity for authentication.
- Store State in Azure Blob Storage with state locking.
- Use Modules for networking, compute, and storage.
- Apply Tags for cost tracking and governance.
- Separate Environments (dev, staging, prod) using workspaces.
- Version Control → Store code in Git and use CI/CD pipelines.
- Secure Secrets → Store credentials in Azure Key Vault, not in .tf files.
Real-World Use Cases
- Enterprise Networks → Provision VNets, subnets, firewalls, and NSGs.
- Hybrid Cloud → Manage on-prem + Azure resources.
- Kubernetes Deployments → Deploy and manage AKS clusters.
- CI/CD Pipelines → Automate Terraform execution in Azure DevOps.
- Disaster Recovery → Recreate infrastructure quickly in another Azure region.
- Scaling Applications → Auto-scaling VMs or containerized apps.
Challenges
- Learning Curve → Understanding Terraform + Azure Resource Manager (ARM).
- State File Risks → Corruption or loss may break deployments.
- Complexity → Large Azure projects require modularization.
- Drift Issues → Manual changes in the Azure Portal may cause mismatches with Terraform state.
More deep into this Topic Introduction Terraform
Future of Terraform with Azure
Terraform continues to strengthen its Azure integration with:
- Enhanced support for new Azure services.
- Better integration with Azure DevOps pipelines.
- Policy-as-Code for governance.
- Support for serverless, AI, and IoT workloads.
With organizations increasingly adopting hybrid and multi-cloud strategies, Terraform will remain the go-to tool for managing Azure infrastructure at scale.
Conclusion
Terraform with Azure integration is a powerful combination that enables teams to automate, scale, and manage cloud infrastructure efficiently. By using Terraform’s declarative approach, reusable modules, and state management, Azure resources can be provisioned consistently and securely.
Whether it’s deploying a simple resource group or scaling an AKS cluster across multiple regions, Terraform makes Azure infrastructure repeatable, reliable, and cloud-agnostic.
For organizations adopting Azure, Terraform ensures:
- Speed in deployments.
- Consistency across environments.
- Collaboration with version-controlled infrastructure.
In short: Terraform + Azure = Smarter Cloud Infrastructure ManagementÂ