Israel faces real and ongoing threats from groups such as Hamas, which has a record of carrying out attacks on civilians and is officially designated a terrorist organisation by the U.S., EU and others (https://home.treasury.gov/policy-issues/terrorism-and-illici...). Monitoring communications within the territories controlled by such entities is a rational, defensive measure.
As for storage on Microsoft servers, Israel, like many governments, uses U.S.-based cloud services with strict contracts and data protections. The U.S. government itself stores classified data on Microsoft Azure through its government cloud services (https://azure.microsoft.com/en-us/solutions/government/). The implication that Microsoft’s involvement is unusual or illicit is misleading.
Criticism of Israeli policy should account for its security context. The article omits this.