@David C , If the target Azure VMs are being backed up using the Azure VM Backup method, then all files/folders will be included in that backup; thus allowing you to retrieve a previous .BAK file.
If, however, the Azure VMs have been configured to use the SQL Server Backup in Azure VMs method, this is only protecting the targeting databases, not the entire VM (or it’s file system).
Hope this answers your question!
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