It looks like dieback. According to my research, "Azaleas with similar symptoms are more likely to be infected by the fungus Phomopsis species. Typically, dying branches (stem dieback) begin to appear on an otherwise healthy plant. The leaves die and can remain attached to the plant until late summer. Usually a single branch on an established plant is affected. On azaleas the discolored wood under the bark appears chocolate brown.
Reduce stress to the plants by planting in partial shade and watering during dry periods. Drought stress and freeze injury may predispose azaleas to infection. Avoid wounding the plant. Prune infected branches well below all discolored wood and dispose of dead plant material. Clean pruning tools between cuts. For azaleas, fungicide sprays containing either thiophanate-methyl or mancozeb can be used."