OK, thanks for the logs.  Could you re-attach those running via sudo (or as root)?  The default user on SLES does not have permissions to read the journal.

What I see so far looks like networking did not come up after cloud-init-local.service completes and writes out a network config.

2019-09-11 18:00:15,242 - stages.py[INFO]: Applying network configuration from ds bringup=False: {'ethernets': {'eth0': {'set-name': 'eth0', 'match': {'macaddress': u'00:0d:3a:6e:6f:8f'}, 'dhcp4': True}}, 'version': 2}

This results in the following files being written:

% cat test_azure_sles/etc/sysconfig/network/ifcfg-eth0 
# Created by cloud-init on instance boot automatically, do not edit.
#
BOOTPROTO=dhcp
DEVICE=eth0
HWADDR=00:0d:3a:6e:6f:8f
NM_CONTROLLED=no
ONBOOT=yes
STARTMODE=auto
TYPE=Ethernet
USERCTL=no

Upstream cloud-init on SLES does not generate/update /etc/resolv.conf  but in the logs the cloud-init in does:

2019-09-11 18:00:15,246 - util.py[DEBUG]: Writing to /etc/sysconfig/network/ifcfg-eth0 - wb: [644] 191 bytes
2019-09-11 18:00:15,247 - util.py[DEBUG]: Reading from /etc/resolv.conf (quiet=False)
2019-09-11 18:00:15,247 - util.py[DEBUG]: Read 795 bytes from /etc/resolv.conf
2019-09-11 18:00:15,247 - util.py[DEBUG]: Writing to /etc/resolv.conf - wb: [644] 866 bytes

At first, I thought maybe it was missing this commit:

% git show b74ebca563a21332b29482c8029e7908f60225a4
commit b74ebca563a21332b29482c8029e7908f60225a4
Author: Robert Schweikert <email address hidden>
Date:   Wed Jan 23 22:35:32 2019 +0000

    net/sysconfig: do not write a resolv.conf file with only the header.
    
    Writing the file with no dns information may prevent distro tools
    from writing a resolv.conf file with dns information obtained from
    a dhcp server.

diff --git a/cloudinit/net/sysconfig.py b/cloudinit/net/sysconfig.py
index ae41f7b..fd8e501 100644
--- a/cloudinit/net/sysconfig.py
+++ b/cloudinit/net/sysconfig.py
@@ -557,6 +557,8 @@ class Renderer(renderer.Renderer):
             content.add_nameserver(nameserver)
         for searchdomain in network_state.dns_searchdomains:
             content.add_search_domain(searchdomain)
+        if not str(content):
+            return None
         header = _make_header(';')
         content_str = str(content)
         if not content_str.startswith(header):
@@ -666,7 +668,8 @@ class Renderer(renderer.Renderer):
             dns_path = util.target_path(target, self.dns_path)
             resolv_content = self._render_dns(network_state,
                                               existing_dns_path=dns_path)
-            util.write_file(dns_path, resolv_content, file_mode)
+            if resolv_content:
+                util.write_file(dns_path, resolv_content, file_mode)
         if self.networkmanager_conf_path:
             nm_conf_path = util.target_path(target,
                                             self.networkmanager_conf_path)
diff --git a/tests/unittests/test_net.py b/tests/unittests/test_net.py
index d679e92..5313d2d 100644
--- a/tests/unittests/test_net.py
+++ b/tests/unittests/test_net.py
@@ -2098,6 +2098,10 @@ TYPE=Ethernet
 USERCTL=no
 """
         self.assertEqual(expected, found[nspath + 'ifcfg-interface0'])
+        # The configuration has no nameserver information make sure we
+        # do not write the resolv.conf file
+        respath = '/etc/resolv.conf'
+        self.assertNotIn(respath, found.keys())
 
     def test_config_with_explicit_loopback(self):
         ns = network_state.parse_net_config_data(CONFIG_V1_EXPLICIT_LOOPBACK)
@@ -2456,6 +2460,10 @@ TYPE=Ethernet
 USERCTL=no
 """
         self.assertEqual(expected, found[nspath + 'ifcfg-interface0'])
+        # The configuration has no nameserver information make sure we
+        # do not write the resolv.conf file
+        respath = '/etc/resolv.conf'
+        self.assertNotIn(respath, found.keys())
 
     def test_config_with_explicit_loopback(self):
         ns = network_state.parse_net_config_data(CONFIG_V1_EXPLICIT_LOOPBACK)

But, I believe that is in 19.1 (or likely patched in the distro version).
Later in the boot, we can see that networking didn't actually come up as Azure datasource can't find a lease file and then goes into some sort of fallback mode which tries to bring up networking (it does) but not with dhcp which is why you're missing DNS (it's provided via option to the DHCP response.


2019-09-11 18:00:15,946 - azure.py[DEBUG]: Unable to find endpoint in dhclient logs.  Falling back to check lease files
2019-09-11 18:00:15,946 - azure.py[DEBUG]: Looking for endpoint in lease file /var/lib/dhcp/dhclient.eth0.leases
2019-09-11 18:00:15,946 - handlers.py[DEBUG]: start: azure-ds/_get_value_from_leases_file: _get_value_from_leases_file
2019-09-11 18:00:15,946 - util.py[DEBUG]: Reading from /var/lib/dhcp/dhclient.eth0.leases (quiet=False)
2019-09-11 18:00:15,947 - azure.py[ERROR]: Failed to read /var/lib/dhcp/dhclient.eth0.leases: [Errno 2] No such file or directory: '/var/lib/dhcp/dhclient.eth0.leases'
2019-09-11 18:00:15,959 - handlers.py[DEBUG]: finish: azure-ds/_get_value_from_leases_file: SUCCESS: _get_value_from_leases_file
2019-09-11 18:00:15,959 - util.py[DEBUG]: Running command ['ifconfig'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:16,020 - azure.py[DEBUG]: ifconfig out: lo        Link encap:Local Loopback  
          inet addr:127.0.0.1  Mask:255.0.0.0
          inet6 addr: ::1/128 Scope:Host
          UP LOOPBACK RUNNING  MTU:65536  Metric:1
          RX packets:2 errors:0 dropped:0 overruns:0 frame:0
          TX packets:2 errors:0 dropped:0 overruns:0 carrier:0
          collisions:0 txqueuelen:1000 
          RX bytes:140 (140.0 b)  TX bytes:140 (140.0 b)

, err: 
2019-09-11 18:00:16,020 - util.py[DEBUG]: Running command ['route', '-n'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:16,093 - azure.py[DEBUG]: route out: Kernel IP routing table
Destination     Gateway         Genmask         Flags Metric Ref    Use Iface
, err: 
2019-09-11 18:00:16,093 - util.py[DEBUG]: Running command ['ip', 'a'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:16,095 - azure.py[DEBUG]: ip out: 1: lo: <LOOPBACK,UP,LOWER_UP> mtu 65536 qdisc noqueue state UNKNOWN group default qlen 1000
    link/loopback 00:00:00:00:00:00 brd 00:00:00:00:00:00
    inet 127.0.0.1/8 scope host lo
       valid_lft forever preferred_lft forever
    inet6 ::1/128 scope host 
       valid_lft forever preferred_lft forever
2: eth0: <BROADCAST,MULTICAST> mtu 1500 qdisc mq state DOWN group default qlen 1000
    link/ether 00:0d:3a:6e:6f:8f brd ff:ff:ff:ff:ff:ff
, err: 
2019-09-11 18:00:16,095 - util.py[DEBUG]: Running command ['ifup', 'eth0'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:31,824 - azure.py[DEBUG]: ifup out: eth0            up
, err: 
2019-09-11 18:00:31,824 - util.py[DEBUG]: Running command ['ip', '-o', 'route', 'list'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:31,827 - azure.py[DEBUG]: ip out: default via 10.0.0.1 dev eth0 proto dhcp 
10.0.0.0/24 dev eth0 proto kernel scope link src 10.0.0.17 
168.63.129.16 via 10.0.0.1 dev eth0 proto dhcp 
169.254.169.254 via 10.0.0.1 dev eth0 proto dhcp 
, err: 
2019-09-11 18:00:31,828 - util.py[DEBUG]: Running command ['ifconfig'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:31,830 - azure.py[DEBUG]: ifconfig out: eth0      Link encap:Ethernet  HWaddr 00:0D:3A:6E:6F:8F  
          inet addr:10.0.0.17  Bcast:10.0.0.255  Mask:255.255.255.0
          inet6 addr: fe80::20d:3aff:fe6e:6f8f/64 Scope:Link
          UP BROADCAST RUNNING MULTICAST  MTU:1500  Metric:1
          RX packets:8 errors:0 dropped:0 overruns:0 frame:0
          TX packets:29 errors:0 dropped:0 overruns:0 carrier:0
          collisions:0 txqueuelen:1000 
          RX bytes:2709 (2.6 Kb)  TX bytes:3373 (3.2 Kb)

lo        Link encap:Local Loopback  
          inet addr:127.0.0.1  Mask:255.0.0.0
          inet6 addr: ::1/128 Scope:Host
          UP LOOPBACK RUNNING  MTU:65536  Metric:1
          RX packets:6 errors:0 dropped:0 overruns:0 frame:0
          TX packets:6 errors:0 dropped:0 overruns:0 carrier:0
          collisions:0 txqueuelen:1000 
          RX bytes:468 (468.0 b)  TX bytes:468 (468.0 b)

, err: 
2019-09-11 18:00:31,831 - util.py[DEBUG]: Running command ['route', '-n'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:31,834 - azure.py[DEBUG]: route out: Kernel IP routing table
Destination     Gateway         Genmask         Flags Metric Ref    Use Iface
0.0.0.0         10.0.0.1        0.0.0.0         UG    0      0        0 eth0
10.0.0.0        0.0.0.0         255.255.255.0   U     0      0        0 eth0
168.63.129.16   10.0.0.1        255.255.255.255 UGH   0      0        0 eth0
169.254.169.254 10.0.0.1        255.255.255.255 UGH   0      0        0 eth0
, err: 
2019-09-11 18:00:31,834 - util.py[DEBUG]: Running command ['ip', 'a'] with allowed return codes [0] (shell=False, capture=True)
2019-09-11 18:00:31,837 - azure.py[DEBUG]: ip out: 1: lo: <LOOPBACK,UP,LOWER_UP> mtu 65536 qdisc noqueue state UNKNOWN group default qlen 1000
    link/loopback 00:00:00:00:00:00 brd 00:00:00:00:00:00
    inet 127.0.0.1/8 scope host lo
       valid_lft forever preferred_lft forever
    inet6 ::1/128 scope host 
       valid_lft forever preferred_lft forever
2: eth0: <BROADCAST,MULTICAST,UP,LOWER_UP> mtu 1500 qdisc mq state UP group default qlen 1000
    link/ether 00:0d:3a:6e:6f:8f brd ff:ff:ff:ff:ff:ff
    inet 10.0.0.17/24 brd 10.0.0.255 scope global eth0
       valid_lft forever preferred_lft forever
    inet6 fe80::20d:3aff:fe6e:6f8f/64 scope link 
       valid_lft forever preferred_lft forever
, err: 
2019-09-11 18:00:31,837 - azure.py[WARNING]: No lease found; using default endpoint
2019-09-11 18:00:31,837 - azure.py[DEBUG]: Azure endpoint found at 168.63.129.16
2019-09-11 18:00:31,837 - handlers.py[DEBUG]: finish: azure-ds/find_endpoint: SUCCESS: find_endpoint



So, I'd like to also the contents of:

/etc/resolv.conf
/etc/sysconfig/network/ifcfg-eth0

And running sudo cloud-init collect-logs so we can get the journal, which should reveal why SLES's networking service didn't come online before cloud-init.service started.