I'd plant some sort of vertical vine or bush to cover the wall, and use large concrete steps as a walkway with gravel or stones in between for low water usage. You might consider bouganvilla, or creeping fig that will attach to the wall without damaging it. Jasmine uses a lot of water.

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Maybe some low growing ground cover to soften it up out there.probably would absorb some sound coming from the a/c. Do this in conjunction with calidesign s ideas.

Thank you for the ideas so far! I do have existing drip lines in the area. Since it is shaded all afternoon plants grow in the area quite well- I recently pulled out some bushes that were obstructing the AC.

I like the calidesign ideas except for the bouganvilla. it sheds everywhere!

Don't consider planting or anything else until you have invested in addressing your flooding issues.

I would start by painting the wall the same colour as the house. Then put down grey stones with pavers. Wayfair has 3 sided trellises (weigh only 24 lb, easy to move, you can buy 2) at $133 ea. Plant something that will work in that area depending on the sun/shade you have.

PS: You'll need to install landscape fabric to prevent weeds to grow between the pebbles. Should there happen to be any, javel straight from the bottle works well.

Is the view from the window all that matters? Or do you sit out there? Does the drainage hole let flood water in or out?

Please add a photo showing the view out the window.

Thanks for the photos of the outside and the layout, it's important to also consider what can be seen from the inside. For example, the window glass appears to begin about 2' off the ground so depending on your furniture placement, the lowest point you may be able to see would be 3-4' off the ground. If that's the case, I would elevate the focal point while still paying attention to the ground level. You can use a grouping of pots and irrigate them by running pot hoses off of your drip line - morning sun should be great for some wonderful color in your climate, or you can do succulents. Add architectural interest with a screen against the wall, and either landscape or wall lighting can make a striking view from your dining room at night. Coordinate this "vignette" with your interior decor. If it's modern inside, keep the outdoor lines clean, or if more rustic or Arizona traditional, add elements that will make it an extension of your interior.

Do not use landscape fabric as one one commenters recommended. Modern Lanscape practice suggests that dirt inevitably lands between the rocks which provide an ideal environment for seeds to root. Many arid region weeds are adapted to retrieve water through long tap roots that break through the fabric and are even harder to dig out. Plus it takes longer for water to penetrate the fabric so is not absorbed into the soil as quickly and also prevents a beneficial microbial system from developing. It does not appear you have much weed growth anyway. Use plants that do well in your area and have interesting sculptural forms and that do not require trimming such as agaves/ yuccas/kangaroo paw. The Phoenix botanical garden is a good place to visit to see what does well in your area and what they look like in person. Cross vine or trumpet vine may be good options for your wall since they are attractive and do well in Phoenix. You should consider either gently sloping the area towards the runoff opening or creating a dry river rock bed to direct the water towards it.

I second the ideas of using trellis to go around the A/C unit's for visual appeal and not blocking airflow, and the dry riverbed rock idea with some large container plantings would look nice. Depending on budget I would definitely at minimum paint the block wall or do a mural on it or stucco it....a bench in the far back would be a nice touch also....just for visual appeal; also what about a hanging herb garden that hangs off the wall just outside the kitchen windows?

I would discourage putting a bench out there unless you really intend to sit out there. Do you have other more interesting places to sit outside? Also, who wants to sit where the AC noise is nearby? I live in Tucson with a similar side yard and have a bougainvillea along the block wall outside my kitchen window and another one outside my office window, and then I have a myrtle bush along the wall outside the dining room window. They are on drip irrigation. There is lovely visual interest from inside the house. Both bougainvillea do shed in the winter (and go dormant since they are the north side of the house) - a small price to pay for such beauty, IMO. The shedding doesn't impact the AC at all. I do have a landscaper come and cut back the bougainvillea in March and blow any debris. The myrtle doesn't shed. I have seating in the backyard, so I would not consider sitting in the side yard (because of AC and pool pump noise). I don't know if this is helpful. Kitchen pic taken at Christmas; myrtle taken just now.

I also live in the Phoenix area. Do not use that weed barrier fabric someone suggested. My house was built in 1969 and I think everyone in the neighborhood used that at some point. When I bought this house, I couldn't figure out why my backyard smelled like pee (I had a 55-pound Weimaraner, never had that issue anywhere else) until I found the barriers (2, with river rock in between!) The yard is full of weeds anyway, and barren from having this destructive barrier all these years. We're removing a couple of feet of dirt and rock to fill with better soil.

I have trumpet vines and yellow bells which both might be good options for your yard. Also consider a ground cover to reduce weed issues, something like yellow dots or cowpeas. (Check out Urban Farm for more info on growing cowpeas in the Valley; lots of people claim you can't but you can.) I love the 3- sided trellis someone suggested for your AC unit; I might have to do that myself!

First put the money into a good drainage blueprint design if you dont  no matter what landscape system you design not managing water and drainage issues will destroy it. and keep your soil spongy and wet. You might have to get the area regraded sloped for drainage into an French drain..But bottom line solve the drainage first..but by your space being so small a seating area would be nice with huge pavers.

Phoenix can be HOT HOT! Go sit out there on a warm afternoon with the AC units working full blast. The area is so small that the AC units will control everything that happens out there. Who wants to sit out there? You must fix the drainage issue first. I would probably put a ton of small stones out there, on top of a double or triple layer of weed cloth, then a couple of nice big planter pots filled with colorful plants which can be seen from inside the house. You may have room for two lounge chairs and an umbrella, but the heat and the sound of the units may not be conducive to actually using the area very often.