In case anyone comes here looking for an example (as it took me days of banging head against the proverbial wall to get this working with templatefile function):

cloud_config.tftpl

#cloud-config
hostname: ${hostname}
user: ops-user
ssh_authorized_keys:
  - OPS_USER_SSH_KEY
manage_etc_hosts: true
fqdn: ${hostname}.${domain}
package_upgrade: true
users:
 - default

cloud_network_config.tftpl

#cloud-config
version: 1
config:
    - type: physical
      name: eth0
      subnets:
      - type: static
        address: '${ip}'
        netmask: '255.255.255.0'
        gateway: '10.1.50.1'

vm.tf

resource "xenorchestra_vm" "unc-lab" {
......
 cloud_config = templatefile("cloud_config.tftpl", {
  hostname = "unc-lab"
  domain = "morris.lan"
})
cloud_network_config = templatefile("cloud_network_config.tftpl", {
  ip = "10.1.55.34"
})
.......

Thanks @ddelnano for your help!

@ppikna97 Hi! How are you calling the templates in your VM resources? As you can see above from my examples I'm simply pulling both user data and network inline with the rest of my config e.g.

cloud_config = templatefile("cloud_config.tftpl", {
  hostname = "bw-lab"
  domain = var.network["domain"]
})
cloud_network_config = templatefile("cloud_network_config.tftpl", {
  ip = "10.1.55.37"
  netmask = var.network["netmask"]
  gateway = var.network["gateway"]
})

Thanks @ddelnano , that worked perfectly!

Appreciate the help!