Mike DiMartino and Bryan Konietzko, the creators of Avatar answered a question about Azula in Sozin's Comet : The Final Battle book
exclusive interview on page 63.This is what they said about her :

"Is Azula really as evil as she seems? Or is there more to her?

Mike: As all the Avatar characters, even Azula has a softer side, though it's buried very
deep. As " The Beach" and " Sozin's Comet" showed, she has a lot of unresolved issues with
her mother. She really feels that her mother didn't love her as much as Zuko, and this
drives her crazy, literally.

Bryan: There are obviously some truly evil people in the world, but in the case of Azula, her
repressed emotions and jealousies corroded her spirit and made her become that way. It is
possible that she could turned out better in a healthier environment, but growing up in a
royal family of a nation seeking world domination proved to exacerbate her problems. But
Zuko and Katara spared her life, and who knows she might have a chance to heal."