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The CIA is using generative AI as a search engine
(www.defenseone.com)
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they probably do. I worked for a content-as-a-service company that had a contract to deliver our product, airgapped, to a three-letter agency on a regular schedule, and we were a tiny company. Microsoft's biggest customer is probably the U.S. government; I'd be shocked if they don't provide an in-house airgapped set of full Azure services for the entire intelligence agency system.
They do. Source: I worked in at MSFT in Azure Identity. It's completely separate, has its own rollout schedule for all products, etc.
There's also a physically separate cloud for China ๐