I think MS looked at the market and thought, well linux already owns the IoT market and doesn't care to take it on.
MS would have to spend money and effort to get NT to be where linux is already, then spend more money and more effort to get people to adopt NT for IoT. In the end, there is no profit in being the OS for IoT.
Instead MS opts to have IoT pay cloud fees for Azure. It helps grow their cloud efforts and profits from existing investments. They don't have to fight linux, just work with it.
MS would have to spend money and effort to get NT to be where linux is already, then spend more money and more effort to get people to adopt NT for IoT. In the end, there is no profit in being the OS for IoT.
Instead MS opts to have IoT pay cloud fees for Azure. It helps grow their cloud efforts and profits from existing investments. They don't have to fight linux, just work with it.