AD DS is the traditional deployment of Windows Server-based Active Directory on a

physical or virtual server. Although AD DS is commonly considered to be primarily a

directory service, it is only one component of the Windows Active Directory suite of
technologies, which also includes Active Directory Certificate Services (AD CS), Active
Directory Lightweight Directory Services (AD LDS), Active Directory Federation
Services (AD FS), and Active Directory Rights Management Services (AD RMS).
Although you can deploy and manage AD DS in Azure virtual machines it’s
recommended you use Azure AD instead, unless you are targeting IaaS workloads
that depend on AD DS specifically.

Azure Active Directory is different

Although Azure AD has many similarities to AD DS, there are also many differences. It
is important to realize that using Azure AD is different from deploying an Active
Directory domain controller on an Azure virtual machine and adding it to your on-
premises domain. Here are some characteristics of Azure AD that make it different.

 Identity solution. Azure AD is primarily an identity solution, and it is

designed for Internet-based applications by using HTTP and HTTPS
communications.
 REST API Querying. Because Azure AD is HTTP/HTTPS based, it cannot
be queried through LDAP. Instead, Azure AD uses the REST API over
HTTP and HTTPS.
 Communication Protocols. Because Azure AD is HTTP/HTTPS based, it
does not use Kerberos authentication. Instead, it uses HTTP and HTTPS
protocols such as SAML, WS-Federation, and OpenID Connect for
authentication (and OAuth for authorization).
 Federation Services. Azure AD includes federation services, and many
third-party services (such as Facebook).
 Flat structure. Azure AD users and groups are created in a flat structure,
and there are no Organizational Units (OUs) or Group Policy Objects
(GPOs).
 Note

Azure AD is a managed service. You only manage the users, groups, and policies.
Deploying AD DS with virtual machines using Azure means that you manage the
deployment, configuration, virtual machines, patching, and other backend tasks.