As you may already know, it was possible to restore a virtual machine by creating a new VM, restoring as disk or replacing existing disks.

Now the option to recover the virtual machine by replacing existing disks is now also supported for virtual machine created using custom images (https://docs.microsoft.com/en-us/azure/virtual-machines/windows/capture-image-resource)

This option is only available for unencrypted managed virtual machine; classic VMs (which should not be used anymore) are not supported by this recovery option.