I had this problem and managed to solve it by moving from a Free pricing Azure web app to a Standard pricing Azure web app. I then had a separate problem (error in GDI+) when exporting to RTF which I managed to solve by adding the section for RTF rendering extensions to my Web.config file, as per:
http://www.telerik.com/support/kb/reporting/details/outofmemoryexception-on-exporting-or-printing-telerik-report-from-azure-websites
Hope this helps anyone who has a similar problem :)