[BUG] Claude Desktop fails to launch on Windows 11 25H2 (Build 26200) — CoworkVMService crashes during HCS DLL initialization

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Key details to include:

Windows 11 Pro, version 25H2, Build 26200
Claude Desktop version 1.1.3189.0 (MSIX)
Error: "We are sorry, Claude Desktop failed to launch. Please check for updates and try again"
Event Viewer shows CoworkVMService EventID 1 with data: [HCS] Initializing HCS DLLs... followed by "Incorrect function"
main.log is 0 bytes — app crashes before writing any logs
Same Claude Desktop works perfectly on Windows 11 Home 24H2 (Build 26100) with identical install
Intel i7-10510U, Hyper-V fully enabled
Tried: clean installs, removing all AppData/Packages, removing MSIX package, disabling Hyper-V, disabling Container features (Docker remnants), removing CoworkVMService, Developer Mode enabled — nothing helps
The app has no graceful fallback — if CoworkVMService fails, the entire app crashes instead of falling back to Chat-only mode

What Should Happen?

Claude windows app should have started at least without cowork option

Error Messages/Logs

<Event xmlns="http://schemas.microsoft.com/win/2004/08/events/event">
<System>
<Provider Name="CoworkVMService" />
<EventID Qualifiers="0">1</EventID>
<Version>0</Version>
<Level>4</Level>
<Task>0</Task>
<Opcode>0</Opcode>
<Keywords>0x80000000000000</Keywords>
<TimeCreated SystemTime="2026-02-15T09:37:41.1737908Z" />
<EventRecordID>82277</EventRecordID>
<Correlation />
<Execution ProcessID="3048" ThreadID="0" />
<Channel>Application</Channel>
<Computer>viz-laptop</Computer>
<Security />
</System>
<EventData>
<Data>[HCS] Initializing HCS DLLs...</Data>
</EventData>
</Event>

PS C:\WINDOWS\system32> Get-Item "C:\Users\vijay\AppData\Local\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\logs\main.log" | Select-Object FullName, Length, LastWriteTime

FullName                                                                                           Length LastWriteTime
--------                                                                                           ------ -------------
C:\Users\vijay\AppData\Local\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\logs\main.log      0 2/15/2026 3:26:16 PM

Steps to Reproduce

Have a Windows 11 Pro machine running version 25H2 (Build 26200)
Ensure Hyper-V and all virtualization features are enabled
Download Claude Desktop installer from claude.ai/download
Run ClaudeSetup.exe — installation completes successfully
Launch Claude Desktop from Start menu
App shows error dialog: "We are sorry, Claude Desktop failed to launch. Please check for updates and try again. If issue persists contact support"
Check Windows Event Viewer → Application log → CoworkVMService EventID 1 shows: [HCS] Initializing HCS DLLs... followed by "Incorrect function"
Check %LOCALAPPDATA%\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\logs\main.log — file is 0 bytes (app crashes before writing logs)

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

1.1.3189.0

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Other

Additional Information

The exact same installer and account works perfectly on Windows 11 Home 24H2 (Build 26100) on a different machine
Issue persists after: complete uninstall + clean reinstall, deleting all AppData/Packages folders, removing MSIX package via Remove-AppxPackage, removing CoworkVMService via sc.exe delete, disabling full Hyper-V (keeping only VirtualMachinePlatform), disabling leftover Docker Container features, enabling Developer Mode, multiple reboots
The app force-starts CoworkVMService on every launch and crashes entirely when it fails — there is no fallback to Chat-only mode

Update: The original launch crash was resolved in a later Claude Desktop update. However, I then hit a second issue — Cowork failing with:

HCS operation failed: HRESULT 0xc03a001a
"Virtual hard disk files must be uncompressed and unencrypted and must not be sparse."

Root Cause: My C: drive had "Compress this drive to save disk space" enabled. The VHDX files in the VM bundle inherited NTFS compression, which Hyper-V rejects. Even after decompressing the files and all parent directories, the error persisted because a stale HNS network and cached VM state from the failed attempts were still registered.

Fix (PowerShell as Admin):

1. Disable drive-level compression: Right-click C: drive → Properties → uncheck "Compress this drive to save disk space"

1. Decompress the Claude package directory and all parent folders:

compact /u /s:"$env:LOCALAPPDATA\Packages\Claude_pzs8sxrjxfjjc" *.*
# Also decompress each parent directory individually with:
# compact /u "<path>" for each folder in the chain

1. Remove the stale Cowork HNS network:

Get-HnsNetwork | Where-Object { $_.Name -like "*cowork*" } | Remove-HnsNetwork

1. Restart Hyper-V services:

Stop-Service CoworkVMService -Force -ErrorAction SilentlyContinue
Restart-Service vmcompute
Restart-Service vmms

1. Delete the VM bundle to force a clean download:

Remove-Item -Recurse -Force "$env:LOCALAPPDATA\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\vm_bundles"

1. Launch Claude Desktop → Cowork starts successfully.

Key takeaway: Decompressing the VHDX files alone is not enough. The stale HNS network and VM registration from failed attempts must also be removed, otherwise Hyper-V keeps trying to use the old (compressed) VM configuration.

Suggestion to Anthropic: The Cowork VM setup should check for NTFS compression on the bundle path before attempting to start the VM, and surface a clear error message if detected. The "Reinstall workspace" option should also clean up HNS networks and stale VM state.