By default, Gen2 VMs do not have a DVD drive so you cannot manually install an OS from an ISO file.  It is envisaged that you’re going to either use PXE (which is supported by a Gen2 synthetic NIC) or use a generalized VHDX file.

You can add a DVD drive by:

  1. Editing the settings of the Gen2 VM
  2. Browse to the SCSI controller
  3. Select DVD Drive from the options on the right
  4. Click Add


Now you have a DVD drive that can mount an ISO file.

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