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Azure Local – CPU reservations on virtual machines
Some application vendors require a CPU core reservation to be configured. However, this configuration can conflict with pre-update health checks.
It you encounter this error during updates, remove the CPU reservations:
Below you can see a picture of an active reservation. This number should be set to 0 while updating happens.

You can use PowerShell on a node to check which virtual machines have this setting configured:
Get-VM | ForEach-Object {
$cpu = Get-VMProcessor -VMName $_.Name
[PSCustomObject]@{
VMName = $_.Name
CPU_Count = $cpu.Count
ReservePct = $cpu.Reserve
LimitPct = $cpu.Limit
Weight = $cpu.Weight
}
}