If you have a Virtual Machine (VM) scale set on a build of Azure Stack that is earlier than version 1802, you can no longer scale out the VM scale set after you apply the Azure Stack 1802 update to the deployment. This makes the scale set unusable.
This problem occurs because of a change in how fault domains are handled between the Compute Resource Provider (CRP) and the Network Resource Provider (NRP) introduced a bug in the way Virtual Machine Scale Sets are handled during scale-out.
To fix this problem, install the following hotfix:
Update for 1802:
AzS Hotfix 1.0.180302.4
(minimum required version: 1.0.180302.1)
Note This Hotfix is cumulative and contains the update that is provided in the following Knowledge Base article:
4103348 Network Controller API service crashes when you try to install an Azure Stack update
Even if tenants have not explicitly created VM scale sets, this problem also affects App Services deployments.
Azure Stack update resources
Manage updates in Azure Stack overview
Monitor updates in Azure Stack using the privileged endpoint