While it is definitely supported to sysprep the newer versions of SQL Server.
And it is also use-able with the procedure for sys-prepping an azure machine
However!
Microsoft does not support sysprepping active production systems!
Production environment
Microsoft does not support the use of Sysprep for the following
scenarios:
To take a computer that has been running in production for
extended period of time and run sysprep then create a new image or
clone from the computer. Sysprep is designed to prepare new
installations of Windows for imaging.
To run sysprep after imaging or
cloning production computer for the purpose of changing the SID and
computername to join the domain and make the computer unique. For
example if you cloned or performed a Physical to Virtual(P2V) of a
computer but want to leave the source computer running instead of
decommissioning it.
When you use Sysprep to prepare an image of such a system, many
problems may surface immediately or may be exposed at a later time
that make it difficult to troubleshoot the system without a full
understanding of the complete history of the changes. Therefore, in
this scenario, you may have to rebuild the image if that installation
has issues.
Your best bet is to install a clean template on a new azure VM, install everything you require and them sysprep it and add that to your VM Templates.
Personal remarks:
We personally have SQL Server installations pretty much every week as upgrades is a continuous process. And we've tried using sysprep, however we decided to leave out SQL Server from our images, as it added complexity for little gain.
Our images have everything needed except for the SQL Server, and we install that afterwards.