Hi @HK
Welcome to the Microsoft Q&A Platform! Thank you for asking your question here.
Upgrading to Premium SSD v2 or Ultra disks, you found that Azure Backup doesn’t support file-level recovery for VMs using these disk types. This means you can't restore individual files or folders, even though the VM is backed up. This limitation is not clearly stated in the official documentation.
You can still recover your files by creating a snapshot of the disk with the data you need. Attach the snapshot as a data disk to another VM, then mount it to access your files, without needing to create a new VM from the backup.
If you prefer another method, you can restore the disk to an Azure File Share, where you can recover the files directly. Alternatively, if file-level recovery is not critical, you could perform a full VM recovery from the backup. After the VM is restored, you can access the disk and manually recover the files you need.
The snapshot and attach method is the most efficient and least disruptive approach, allowing you to recover files without affecting your current production environment.
If you have any concerns, please go through this link: -
https://learn.microsoft.com/en-us/azure/backup/backup-azure-restore-files-from-vm
https://learn.microsoft.com/en-us/azure/virtual-machines/disks-incremental-snapshots?tabs=azure-cli
If you have any further queries, do let us know
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