Azure Active Directory (Azure AD) is a cloud-based identity management system that provides a single sign-on experience for users across devices. Azure AD can replace Active Directory, but there are some limitations. Azure AD can support only a limited number of users and devices, and it doesn’t support directory-level security. Azure AD also doesn’t support federation with on-premises Active Directory.
In comparison, Active Directory supports millions of users and devices, and it supports directory-level security. Additionally, Active Directory can federate with other Active Directory domains.