Microsoft is set to offer in-country data processing for Microsoft 365 Copilot to customers in India, Australia, the United Kingdom, and Japan by the end of 2025. This move signifies a major step towards addressing data sovereignty concerns and enhancing regulatory compliance, particularly for government agencies and highly regulated industries.
The announcement, made on Wednesday November 5th, 2025, positions India as a priority market in Microsoft's AI infrastructure expansion. Paul Lorimer, Corporate Vice President of Office 365 Enterprise and Cloud Engineering, stated that Indian organizations utilizing Microsoft 365 Copilot will have their AI interactions processed within the country's borders under normal operating conditions. This includes the processing of prompts and responses from Microsoft 365 Copilot's large language models, which are hosted on Azure OpenAI.
In-country data processing involves the collection, storage, and analysis of data within a nation's geographical boundaries. By ensuring that Copilot interactions are processed in domestic data centers, Microsoft aims to provide greater control over data, improve governance, and meet stringent security and regulatory requirements. This is particularly relevant in light of India's increasing emphasis on data localization. Furthermore, in-country data processing can lead to reduced latency, which translates to faster and more responsive Copilot experiences for users.
Microsoft currently offers in-country data residency to Microsoft 365 and Microsoft 365 Copilot customers in 27 countries and in-region data residency and processing for countries within the European Union (EU) Data Boundary. This new initiative builds upon these existing investments in data residency.
Looking ahead, Microsoft plans to extend in-country processing to eleven additional countries in 2026. These countries include Canada, Germany, Italy, Malaysia, Poland, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates, and the United States. This expansion demonstrates Microsoft's commitment to meeting local compliance requirements across its global infrastructure.
This move marks a shift from previous resistance by large tech firms to data localization mandates. Increased data center presence around the world, including a surge of investments in India, has made data residency a key factor for cloud and data center providers. Regulations are a primary driver for Microsoft's offer, alongside potential benefits of reduced latency.
Microsoft's commitment to data sovereignty is evident through strategic investments and infrastructure designed for the future of AI. The company is setting a standard where innovation and sovereignty are combined, giving customers greater flexibility and control over their data. This initiative is designed to enable customers, especially those in government and highly regulated industries, to access Microsoft 365 Copilot with enhanced governance, security, and regulatory compliance options.
