@Abhishek Singh Thank you for your patience over the matter!!!
Below is the response I got from our Product Group:
No, it is not possible to configure WSUS server in azure with SQL PAAS database. About a year and a half ago, there was some exploration to see if it would work and discovered there would have to be changes to WSUS. We suggest that customers follow the software requirements for WSUS which is to either use the Windows Internal Database (WID) on the WSUS server, or to use an in support version of Microsoft SQL Server.
The background here is that Azure SQL does not support Windows Authentication. WUS relies on Windows Authentication to access the DB.
Hope it helps!!!
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