What capability does Azure Functions for IoT provide that contributes to managing large-scale applications?

Azure Functions for IoT effectively accommodates large-scale applications by leveraging serverless computing, which allows developers to execute code in response to events without the need to manage the underlying infrastructure. This capability is essential for handling variable demand patterns, such as those seen in IoT applications where the volume of incoming data can fluctuate significantly based on real-time events.

When demand increases, Azure Functions can automatically scale out by provisioning additional compute resources, ensuring that all incoming data is processed without performance degradation. Conversely, during periods of low demand, the resources scale back down, optimizing costs. This on-demand scaling provides a flexible approach that aligns well with the unpredictable nature of IoT workloads, enabling developers to focus on building and deploying applications without worrying about resource management.

Other options like static routing of messages or preparing application code for VM deployment do not directly address scalability and responsiveness to variable workloads. Similarly, while storing data in a centralized database is important, it is not specifically tied to the capabilities of Azure Functions or their role in managing unpredictable application demands.