In a strategic decision aimed at strengthening data sovereignty and regulatory compliance, Microsoft has announced that it will begin local processing of Microsoft 365 Copilot data within the UAE starting in early 2026.
This change applies to qualified UAE organisations, particularly those operating under regulated sectors such as finance, healthcare, energy, and telecommunications. Microsoft will host this capability in its cloud data centers located in Dubai and Abu Dhabi, ensuring that sensitive information — including prompts and responses through Copilot — is stored and processed within UAE borders.
Key Drivers of the Move
- Data sovereignty & compliance: Keeping AI-generated interactions within the country addresses laws and regulations that require data to remain under local jurisdiction.
- Regulatory alignment: The move is aligned with UAE’s AI policies issued by the Cybersecurity Council (CSC) and supports new frameworks such as the Dubai AI Security Policy.
- Improved performance and trust: Local processing reduces data latency and increases responsiveness. It also builds organisational trust (especially for regulated entities) that sensitive operations can use AI without exposing data overseas.
Implications & Outlook
- Organizations in sectors with strict data residency requirements will be more willing to adopt generative AI tools like Copilot.
- This can accelerate AI integration in government, healthcare, finance, and other critical sectors where non-local processing poses barriers.
- Microsoft is committed to further expanding its infrastructure in the UAE, contributing to job creation and skill development in AI for the region.
- Additionally, the initiative may stimulate competitive responses from other cloud/AI service providers to offer in-country data-processing solutions.
Reference:
Microsoft brings AI data processing to UAE to boost compliance — The National The National
