Microsoft has halted specific cloud and artificial intelligence services to a unit within Israel's Ministry of Defence after uncovering evidence that its Azure infrastructure was being used in a mass surveillance programme targeting Palestinians. The firm confirmed that access to a subset of its subscriptions has been suspended, while non-surveillance services remain unaffected.

The decision follows an investigative exposé by The Guardian, in collaboration with +972 Magazine and Local Call, which documented that Israel's Unit 8200 had stored and analysed intercepted civilian phone conversations using Microsoft's Azure platform. The data, reportedly amounting to thousands of terabytes, was held on Microsoft servers in the Netherlands and used to inform targeting exercises in Gaza and the West Bank. Microsoft had commissioned an external review by a law firm alongside its internal audit.

Brad Smith, Microsoft's vice chair and president, wrote to staff that the company's review“found evidence that supports elements” of the investigation's claims, prompting the suspension of those services that facilitated surveillance and intelligence processing. He emphasised that Microsoft does not provide technology to enable mass civilian surveillance and that this action is consistent with longstanding company principles.

Despite the suspension, Microsoft has said it will maintain cybersecurity support to Israel. The company clarified that only specific Orientations-cloud storage and AI functionalities tied to the surveillance programme-were disabled. Other Microsoft contracts with Israeli government entities, including cybersecurity agreements, have not been terminated.

Israel's Ministry of Defence declined to comment on the action. Israeli officials, speaking through intermediaries, suggested the move would not undermine operational capabilities. Critics note that the cut applies only to a single unit and does not affect the broader contractual relationship between Microsoft and Israel's defence establishment.

The Microsoft decision has stirred both corporate and activist communities. Internally, employees have staged protests demanding that the company fully cut ties with military contracts that facilitate human rights abuses. Some staff were dismissed in past months for participating in sit-ins and walkouts. Externally, advocacy groups such as No Azure for Apartheid and CAIR lauded the move but called for more extensive action across all defence contracts.

Analysts, however, remain cautious about the effectiveness of this step. They point out that the surveillance network built by Unit 8200 is deeply integrated, with contingency plans to migrate data to alternate cloud providers such as Amazon Web Services already underway. The cut to Microsoft, while symbolic, may not substantially degrade the surveillance capabilities unless similar actions are taken by other vendors.

The controversy underscores growing tension between ethics in technology and state security demands. Over the past year, Microsoft confronted internal dissent over its ties to Israel, culminating in public protests and resignations by employees who characterised cloud and AI as“the bombs and bullets of the 21st century.”

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