Hello MEADOWS, LONNIE,
Greetings! Welcome to Microsoft Q&A Platform.
The error message "Failed to update disk. Error: Internal Error during resize." tells that something went wrong during the process of resizing an Azure virtual machine (VM) disk.
The reasons to get this type of error are,
Sometimes, disk encryption settings can cause issues. Make sure that disk encryption is fully disabled. If disk encryption was previously enabled, it might still be present in the VM JSON template. To resolve this if we disable the disk encryption through the Azure portal it will disable the disk encryption and on the Azure portal, we can see there is no disk encryption and also the related Key vault field is empty. But still when we try to add/remove the disk and save the operation we will get same message. This is because in the VM JSON template we can see it still maintains the disk encryption-related properties. So, to overcome this error we remove the disk encryption property from JSON template.
Once check the cluster or region from where your VM is hosted has enough resources to support the resize operation. https://learn.microsoft.com/en-us/troubleshoot/azure/virtual-machines/windows/restart-resize-error-troubleshooting.
Once check the disk type you're trying to resize whether it is support or not to the desired size or there might be limitations based on the disk type like standard HDD, premium SSD. https://learn.microsoft.com/en-us/azure/virtual-machines/disks-types
Here is the doc for your reference: https://learn.microsoft.com/en-us/azure/virtual-machines/windows/expand-os-disk
Similar thread for reference - https://learn.microsoft.com/en-us/answers/questions/1184474/disk-controller-error-when-attempting-to-resize-vm
Hope this answer helps! please let us know if you have any further queries. I’m happy to assist you further.
Please "Accept the answer” and “up-vote” wherever the information provided helps you, this can be beneficial to other community members.