Thank you for reaching out to the Microsoft Q&A platform.
Based on your question description we understand that you are facing an issue with creating or updating an Azure VM extension.
Here are some steps you can take to troubleshoot and resolve this issue:
If the VM Agent isn't running or is failing to report a Ready status. then the extensions won't work correctly.
Check that the VM Agent is running and reporting a "Ready" status. Remove the extension and reinstall the extension.
Please find the below document link for your reference:
https://learn.microsoft.com/en-us/azure/virtual-machines/extensions/troubleshoot
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Thank you.