You have an Azure virtual machine named VM1 that runs Windows Server.

When an Azure virtual machine is redeployed, Azure moves the VM to a new physical host. During this process, the OS disk and any attached data disks are preserved, but the temporary disk is not. On Windows VMs deployed with default settings, drive D: is the temporary disk, backed by local storage on the host. Microsoft documentation states that the temporary disk is non-persistent and data on it can be lost during maintenance, redeploy, or deallocation events.

Files created on drive C: reside on the OS disk, which is persistent and retained across redeployments. User profile and system settings such as screen saver timeout and desktop background are stored on the OS disk and therefore remain intact after redeploy. Consequently, the only change that will be lost is data written to drive D:.