

Microsoft recommended steps for performing a upgrade: Microsoft knowledge article: An in-place system upgrade is not supported on Windows-based Azure VMs

The server starts the upgrade and the RDP connection gets disconnected.Respond to all question in the Windows Server setup.Remember to replace “ XXXXX– XXXXX– XXXXX– XXXXX-XXXXX” with the product key.Execute the following command: \setup.exe /auto upgrade /DynamicUpdate enable /pkey XXXXX –XXXXX –XXXXX –XXXXX -XXXXX /showoobe none.Open a elevated command-prompt and navigate to the installation source.Mount the ISO file on the server where you are performing the upgrade.Download the Windows Server 2016 Datacenter from Microsoft Volumen Licensing.Make sure you have a backup or copy of the VHD.Performing the upgrade to Windows Server 2016 Just in case anything doesn’t go as expected and a restore is needed. Note: Before performing the steps below it is highly recommended that you save a copy of the VHD or before a backup of the virtual machines using Azure Backup. This is a very time consuming task that can be avoided, if a in-place upgrade can be completed successfully Microsoft and other community blog post would recommend that you either create and new server or download the VHD from Microsoft Azure and perform the upgrade on a local Hyper-V installation. I have successfully performed several upgrades for customers throughout the last couple of years. Microsoft currently doesn’t support in-place upgrade of Windows operating systems running on virtual machines in Microsoft Azure.
