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Azure Arc SQL Extension issue during SQL SERVER install through Use pay-as-you-go billing

Knapek, Martin 20 Reputation points
2026-04-19T12:25:02.4966667+00:00

At customer Windows Server Datacenter 2022 is not any way how to Install SQL SERVER through Use pay-as-you-go billing through Microsoft Azure during SQL Installation is this option not available (greyed).

Despite SQL Extension pipeline issues (knows MS bugs in extensions) , we managed prepare the server with AzureConnectedMachineAgent and SQL Arc Extensions. We tried to install the SQL Server through Use pay-as-you-go billing , but it seems there is policy issues within Windows Server Datacenter 2022.

vs

We tried with Windows Server Standard 2022 and there is no issues and all is working with all possibilities.

We need to solve this issue asap, more then one customer has this issues.

There should be a binary installation of SQL Server without Evaluation element, but its not available for us anywhere.

Azure Arc
Azure Arc

A Microsoft cloud service that enables deployment of Azure services across hybrid and multicloud environments.

Answer accepted by question author

  1. Bharath Y P 8,495 Reputation points Microsoft External Staff Moderator
    2026-04-20T02:26:30.51+00:00

    Hello Martin, it looks like what you’re hitting is expected behavior—on Windows Server Datacenter 2022 that wasn’t deployed as an Azure Marketplace VM, the “Use pay-as-you-go billing” choice is deliberately unavailable (greyed out). That option only becomes selectable when the underlying OS is a pay-as-you-go SKU from Azure Marketplace. On Standard you were “cheating” by installing the Evaluation edition locally and then switching license types in-place, but with Datacenter that isn’t exposed unless you’re on an Azure‐provisioned image.

    Here’s what you can try:

    1. Deploy a Windows Server Datacenter 2022 VM from the Azure Marketplace
      • Spin up a new VM in Azure using the Windows Server Datacenter 2022 image
      • Connect it to Azure Arc (using the AzureConnectedMachineAgent)
      • When you run the Azure Arc > Servers > Extensions > + Add > Azure extension for SQL Server flow, you’ll now see Use pay-as-you-go billing enabled.
    2. If you need to stay strictly “on-prem” or non-Marketplace, use the SQL setup command line to force the Azure pay-as-you-go license acceptance. From an elevated prompt on your Datacenter box run something like: 
      
   Setup.exe /Q 

     /IAcceptSQLServerLicenseTerms 

     /IAcceptAzureLicenseTerms 

     /ACTION=INSTALL 

     /FEATURES=SQLEngine,FullText 

     /INSTANCENAME=MSSQLSERVER
      That parameter set installs the Database Engine and registers the pay-as-you-go license—bypassing the GUI limitation.
    3. Once SQL Server is up, onboard the instance to Azure Arc (or re-run the extension install) to complete billing registration.

    Hope that helps unblock you. If you’re still seeing “greyed out” or errors, can you share:

    • Are these truly Azure-provisioned VMs or on-prem/VMware?

    • Exact OS SKU output from winver or systeminfo

    • Versions of AzureConnectedMachineAgent & Azure SQL Arc Extension

    • Any lines from C:\ProgramData\GuestConfig\extension_logs\Microsoft.AzureData.WindowsAgent.SqlServer\unifiedagent.log or the deployer.log

    That’ll help narrow it down.

    References

    • Troubleshoot Azure extension for SQL Server

    • Install & connect to Azure via CLI

    • Connect your SQL Server to Azure Arc (portal flow)

    • Pay-as-you-go licensing FAQ

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  1. Knapek, Martin 20 Reputation points
    2026-04-19T12:29:03.1566667+00:00

    Its an on-prem win server datacenter 2022 running on WMware, within my lab with win server datacenter 2022 Evaluation I did the same process and its working.
    Customer has his own hardware, where VMware is running.

    On this VMwhare is Windows Server Datacenter 2022 onPremise) installed from original ISO image, which is licenseed per vCORE

    We prepared a the SERVER fully ARC Enabled through the process:

    run RegisterSqlServerArc script for LicencedOnly type, so we have WindowsAget.SQLServer extension ready, and then run .\modify-arc-sql-license-type_offset.ps1as  (second, third attachment)

    All is ready as showed in attached .zip

    Then we do not have binary installation of SQL Server without Evaluation element, so we run classic SQL2025-SSEI-Eval installation for SQL Server , there is no option to go for PAYG during SQL setup

    __
    I did another series of tests and:__

    1) Server 2022 Datacenter licensed – PAYG does not work

    2) Server 2022 Datacenter licensed with vmware tools – PAYG does not work

    3) Server 2022 Datacenter evaluation – PAYG does not work

    4) Server 2019 Standard with HW version 17 (ESXi 7.0) and E1000E network card – PAYG does not work

    5) Windows 11 on a regular PC – PAYG does not work

    6) Windows 2022 Datacenter nested under Hyper-V under a server in our vmware – PAYG works

    So I don't think the problem is in the W2022 datacenter server itself, but in some vmware setting, or in the specific HW that vmware provides.

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  2. Q&A Assist
    2026-04-19T12:25:17.93+00:00
    AI generated content. This question contains an answer created with AI from Q&A Assist. Learn more

    The context only covers Azure Arc–enabled SQL Server, the Azure extension for SQL Server, and pay‑as‑you‑go (PAYG) billing after installation. It does not contain information about:

    • Differences in SQL Server setup behavior between Windows Server 2022 Datacenter vs Standard.
    • Known issues or policies that would gray out the “Use pay-as-you-go billing through Microsoft Azure” option specifically on Windows Server 2022 Datacenter.
    • A separate “binary installation of SQL Server without Evaluation element.”

    From the available context, the only supported PAYG-related paths are:

    1. Install SQL Server normally (using product key, free edition, or PAYG option when available in setup), then:
      • Connect the server to Azure Arc using Azure Connected Machine agent.
      • Install the Azure extension for SQL Server either:
        • From Azure portal: Arc → Servers → Extensions → + Add → Azure extension for SQL Server, then set edition and license type (Paid or PAYG) and complete the wizard. See: “Connect your SQL Server to Azure Arc on a server already enabled by Azure Arc – Azure portal steps.”
        • Or via command line / deployment options documented under “SQL Server enabled by Azure Arc deployment options.”
    2. Use Azure Arc automatic deployment:
      • Ensure Microsoft.AzureArcData resource provider is registered.
      • Use one of the documented deployment options so that Azure automatically installs the Azure extension for SQL Server and sets the license type (including PAYG) based on tags such as ArcSQLServerExtensionDeployment.
      See: “Manage automatic connection for SQL Server enabled by Azure Arc – Automatically install the Azure Extension for SQL Server on new servers connected to Arc.”
    3. After onboarding, manage or change license type (including switching to PAYG) at the Arc SQL resource level and/or instance level, including bulk changes via the “Modify Arc SQL license type” PowerShell script, and follow the guidance for transitioning to PAYG billing. See: “Move SQL Server license agreement to pay-as-you-go subscription – Transition from License with Software Assurance or SQL Server subscription.”

    The context does not provide any Datacenter‑specific workaround for the SQL setup UI, nor any alternative non‑Evaluation installer bits. It only documents that:

    • SQL Server 2025 setup supports “Use pay-as-you-go billing through Microsoft Azure” as an edition choice, which requires an active Azure subscription and is tied to Azure Arc configuration.
    • The Azure extension for SQL Server can always be installed post‑setup via Azure Arc and then configured for PAYG billing.

    Given the constraints of the context, the actionable path is:

    1. Install SQL Server on Windows Server 2022 Datacenter using a supported edition path that is available (for example, product key or free edition, as appropriate for the environment).
    2. Ensure the server is Arc‑enabled (Azure Connected Machine agent healthy, no firewall/proxy issues) and then install the Azure extension for SQL Server from Azure Arc.
    3. Configure the Arc‑enabled SQL Server instance(s) for PAYG billing using the documented configuration methods (including the Modify Arc SQL license type script for bulk changes) and ensure recurring billing consent is provided.

    If the setup UI option remains grayed out only on Datacenter and all Arc prerequisites are met, this behavior is not covered in the provided documentation and would require escalation through Microsoft Support with setup logs and environment details.

    References:

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