Ok i figured it out. Seems like you need to have a valid or empty Network Config. When using the default commented out config it will not work. If i empty the Network Config field or uncomment all the lines it will work as expected.
Following works
User Config
#cloud-config
hostname: testmachine2
ssh_authorized_keys:
- ssh-rsa AAAAB3NzaC1yc2EAAAADAQABA...
packages:
- xe-guest-utilities
Network Config
network:
version: 1
config:
- type: physical
name: eth0
subnets:
- type: dhcp
Following does not work
User Config
#cloud-config
hostname: testmachine2
ssh_authorized_keys:
- ssh-rsa AAAAB3NzaC1yc2EAAAADAQABA...
packages:
- xe-guest-utilities
Network Config
#network:
# version: 1
# config:
# - type: physical
# name: eth0
# subnets:
# - type: dhcp