[BUG] Cowork fails with HCS 0x80070569 after auto-update from 1.1.8629 to 1.1.8986 on domain-joined Windows machine

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?

Cowork was working fine on version 1.1.8629.0 (installed March 25, 2026).
After auto-update to 1.1.8986.0 on March 26, Cowork stopped working with
HCS 0x80070569 error. Further update to 1.2.234.0 did not resolve it.

Error Message

HCS operation failed: failed to create compute system: HcsWaitForOperationResult
failed with HRESULT 0x80070569: {"Error":-2147023511,"ErrorMessage":"",
"Attribution":[{"OperationFailure":{"Detail":"Construct"}}]}

Version History

• 1.1.8629.0 installed March 25 ✅ Cowork working
• 1.1.8986.0 auto-updated March 26 ❌ Cowork broken
• 1.2.234.0 current version ❌ Cowork still broken

Environment

• OS: Windows 11
• Machine: Domain-joined (hybrid Azure AD + on-prem AD)
• Credential Guard: Enabled (UEFI-locked)
• HVCI: Enabled
• Hyper-V: Enabled
• Security team confirmed Hyper-V/virtualization is allowed by policy

Key Registry Findings

HKLM\SOFTWARE\Policies\Microsoft\Windows\DeviceGuard:

• EnableVirtualizationBasedSecurity: 1
• HypervisorEnforcedCodeIntegrity: 1
• LsaCfgFlags: 1

HKLM\SYSTEM\CurrentControlSet\Control\DeviceGuard:

• Locked: 1
• EnableVirtualizationBasedSecurity: 1

Notes

Cowork was working fine with this exact security configuration on version
1.1.8629.0. The break coincides exactly with the auto-update to 1.1.8986.0,
suggesting a regression was introduced in that update.

What Should Happen?

CoWork is not working

Error Messages/Logs

Failed to start Claude's workspace
HCS operation failed: failed to create compute system: HcsWaitForOperationResult failed with HRESULT 0x80070569: {"Error":-2147023511,"ErrorMessage":"","Attribution":[{"OperationFailure":{"Detail":"Construct"}}]}
Restarting Claude or your computer sometimes resolves this. If it persists, you can reinstall the workspace.

Steps to Reproduce

I click on CoWork and the above error shows up

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

version 1.1.8629.0

Claude Code Version

1.1.8986.0

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Windows Terminal

Additional Information

_No response_