I am not familiar with Azure SQL databases and there is no recommended data source component. The data source components you will use have to be considered with your requirements and implemented data access.
Having into account the provided Wiki article - https://en.wikipedia.org/wiki/SQL_Azure, and https://en.wikipedia.org/wiki/WCF_Data_Services and https://azure.microsoft.com/en-us/documentation/articles/web-sites-dotnet-deploy-aspnet-mvc-app-membership-oauth-sql-database/, you can use the ObjectDataSource component
(this is the most general one).
This allows you to implement custom data access layer, in which you can create the context and execute methods to fetch data. How the ObjectDataSource works:
In general, the purpose of the ObjectDataSource component is to provide data to the report in a declarative manner. The ObjectDataSource.DataSource should be the assembly qualified name or Type of the data access layer (class), where the reporting engine will use System.Reflection to create the instance of the class (by using its default constructor) and to execute its method specified by the ObjectDataSource.DataMember property.
Telerik by Progress
Do you want to have your say when we set our development plans?
Do you want to know when a feature you care about is added or when a bug fixed?
Telerik Feedback Portal
and vote to affect the priority of the items