When VMs are included in an availability set, Azure distributes them across multiple fault domains and update domains to ensure that if there is a hardware or software failure, only a subset of the VMs are impacted, providing higher availability. When you try to resize a VM, the Azure platform needs to allocate the necessary resources in a specific fault domain and update domain. If the platform cannot find available resources in the same fault domain and update domain, the allocation fails.
To resolve this issue, you can stop all three VMs in the availability set, resize the VM that you need, and then start all three VMs again. By stopping all three VMs, you ensure that all of them are running on different fault domains and update domains. This way, when you start them again, Azure can allocate resources for each VM in a separate domain, making it more likely that the allocation will succeed