Hello Krishna satish Polasi Venkata
During the upgrade operation, buffer node(s) are added in order to run the workload of the node(s) that are being upgraded. After the upgrade is finished, the buffer node is removed. You can read more here: https://learn.microsoft.com/en-us/azure/aks/upgrade-cluster?tabs=azure-cli#upgrade-an-aks-cluster
The number of buffer node(s) are determined based on the node surge you specified. At this moment, if you don't specify the surge value, it adds an extra node by default. This behavior will change in Kubernetes version 1.27 when the surge value will be 10%.
That node(s) will require IP addresses and the number of IP addresses depends on the maxPods parameter value you use.
That message is saying that you don't have enough IP addresses for the buffer node(s) needed during the upgrade operation.
In this situation, you can reduce the cluster nodes by scaling down to free-up IP addresses for the upgrade.
If scaling down isn't an option, and your virtual network CIDR has enough IP addresses, try to add a node pool that has a unique subnet:
Add a new user node pool in the virtual network on a larger subnet.
Switch the original node pool to a system node pool type.
Scale up the user node pool.
Scale down the original node pool.
This official documentation is intended to address the situation you are facing, so I would highly recommend you to follow it: https://learn.microsoft.com/en-us/troubleshoot/azure/azure-kubernetes/error-code-subnetisfull-upgrade
I hope this is helpful. If any clarification needed, let me know and I will do my best to answer.
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Thank you!