Azure Local subscriptions and OEM license

Scott R - Yes, you still need to pay the Azure Local Host Service fee ($10/core/month), even with the OEM license and even if you're only running Windows 11 AVD guests (no Windows Server VMs).

The Azure Local OEM license covers two things: (https://learn.microsoft.com/en-us/azure/azure-local/oem-license?view=azloc-2605)

1. Azure Local OS the host operating system for the cluster
2. Windows Server 2025 Datacenter guest rights - unlimited Windows Server VMs on that hardware and what it does not include is the Azure Local Host Service fee, which is a separate Azure subscription charge for cloud management, Azure Arc integration, and ongoing platform services.

The OEM license is a one-time perpetual entitlement tied to the hardware. The Host Service fee is a recurring Azure charge that applies regardless of license type unless you qualify for Azure Hybrid Benefit (AHB).

If your client has existing Windows Server licenses with active Software Assurance (or Windows Server subscription licenses), they can apply Azure Hybrid Benefit to waive the $10/core/month Host Service fee entirely.

Since the cluster will only run Windows 11 AVD session hosts (not Windows Server guests), the $23.30/core/month Windows Server guest add-on is irrelevant here that's for Windows Server VM licensing, which you're not using.

Licensing for Windows 11 AVD Guests

1. Windows 11 multi-session or single-session VMs on Azure Local require per-user licensing — not per-core. Eligible licenses include:
2. Microsoft 365 E3/E5, F3, Business Premium
3. Windows Enterprise E3/E5
4. Windows VDA E3/E5

Each user accessing the AVD environment needs one of these licenses.

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