How many fault domains are supported with IaaS using ARM?

Q. What is the number of fault domains supported for IaaS v2 (Azure Resource Manager)?

A. The initial IaaS v1 allowed for two fault domains to be used by the VMs in an Availability Set, where a fault domain can be thought of as a rack of servers. IaaS v2, which uses the new Azure Resource Manager (ARM), now uses three fault domains.

This provides better support for workloads that need to leverage quorum and increased availability of VM instances in the event of a rack failure.