[This article was contributed by the SQL Azure team.]
Yesterday afternoon we reported an intermittent connection issue and I am happy to report that the issue has been identified and resolved. The issue was tracked to an out of data Kerberos encryption policy on one of our machines.
As an additional heads up, today the SQL Azure service will be undergoing a planned upgrade (SU2), as announced at the MIX conference a couple weeks ago. This is a rolling deployment across all data centers worldwide and is expected to complete without impact to availability by the end of the week (9 April). Please check back here for more details once the deployment is complete.