@Matt Ryan The VM disk size is limited by the image the VM is created from. Most images have a default OS drive of 127GB. If you wish to decrease this you would need to use or create a new image with a smaller OS disk. You might find this Stack Overflow thread helpful in reducing the disk size.
You will be billed for the storage used by the OS disk. Please check the FAQ here for more questions on pricing.
Hope this helps! Please let us know if you have further questions or issues.
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