Microsoft confirmed that a recent Windows 365 update is blocking customers from accessing their Microsoft 365 Cloud PC sessions.

Windows 365 is a cloud-based service that runs on Azure Virtual Desktop and allows enterprise customers to stream Windows Cloud PCs to end users under Windows 365 Enterprise or Windows 365 Business subscriptions.

The incident began on Tuesday at 19:00 UTC, when users started experiencing sign-in failures and intermittent access issues to their Cloud PCs.

"We detected an issue with Cloud PC connections and sign-in through our automated service monitoring after seeing an increase in failed connection attempts," Microsoft said at the time. "We're investigating our service telemetry, including recent Windows 365 updates, to identify the underlying cause of impact and to help inform our next troubleshooting steps."

Microsoft says its automated monitoring systems detected the problem after registering an increase in failed connection attempts.

After investigating the issue, the company's engineers found that a Windows 365 update causes the access problems and are now analyzing the recent update to determine the best way to mitigate the impact.

"A recent Windows 365 update intended to further improve security functionality is causing failed connection attempts to Cloud PC sessions," it says in an incident report tracked under WP1217671.

"We're continuing with our analysis of the recent update to determine how best to mitigate impact."

Microsoft also offered two temporary workarounds while engineers work on a permanent fix, which require users to access their Cloud PCs through the Windows App Web Client at windows.cloud.microsoft or using the Remote Desktop client for Windows to connect to Azure Virtual Desktop.

While Microsoft has not disclosed what regions or how many users are affected, this ongoing issue is tagged as causing "service degradation and flagged as an incident, a term commonly used for critical service issues with noticeable user impact.

Update January 14, 07:01 EST: In a separate entry on the Windows release health dashboard, acknowledged a known issue triggered by the January 2026 KB5074109 Windows security update that causes authentication error and connection failure during Remote Desktop connections to Azure Virtual Desktop and Windows 365.

The list of affected platforms includes Windows 11 25H2 and 24H2, and Windows Server 2025, Server 2022, and Server 2019.