Problem with pwsh after installing a VS VCode update (Visual Studio Code 1.115)

Prerequisites

• I have written a descriptive issue title.
• I have searched all open and closed issues to ensure it has not already been reported.
• I have read the troubleshooting guide.
• I am sure this issue is with the extension itself and does not reproduce in a standalone PowerShell instance.
• I have verified that I am using the latest version of Visual Studio Code and the PowerShell extension.
• If this is a security issue, I have read the security issue reporting guidance.

Summary

The terminal process "C:\Program Files\PowerShell\7\pwsh.exe '-NoProfile', '-ExecutionPolicy', 'Bypass', '-Command', 'Import-Module 'c:\Users\aclaude.vscode\extensions\ms-vscode.powershell-2025.5.0\modules\PowerShellEditorServices\PowerShellEditorServices.psd1'; Start-EditorServices -HostName 'Visual Studio Code Host' -HostProfileId 'Microsoft.VSCode' -HostVersion '2025.5.0' -BundledModulesPath 'c:\Users\aclaude.vscode\extensions\ms-vscode.powershell-2025.5.0\modules' -EnableConsoleRepl -StartupBanner "PowerShell Extension v2025.5.0 Copyright (c) Microsoft Corporation. https://aka.ms/vscode-powershell Type 'help' to get help. " -LogLevel 'Warning' -LogPath 'c:\Users\aclaude\AppData\Roaming\Code\logs\20260415T105454\window1\exthost\ms-vscode.powershell' -SessionDetailsPath 'c:\Users\aclaude\AppData\Roaming\Code\User\globalStorage\ms-vscode.powershell\sessions\PSES-VSCode-10428-179075.json' -FeatureFlags @() '" terminated with exit code: 1.

PowerShell Version

Name                           Value
----                           -----
PSVersion                      7.6.0
PSEdition                      Core
GitCommitId                    7.6.0
OS                             Microsoft Windows 10.0.26100
Platform                       Win32NT
PSCompatibleVersions           {1.0, 2.0, 3.0, 4.0.}
PSRemotingProtocolVersion      2.4
SerializationVersion           1.1.0.1
WSManStackVersion              3.0

Visual Studio Code Version

1.115.0
x64

Extension Version

ms-vscode.powershell@2025.5.0

Steps to Reproduce

Problem with pwsh after installing a VS VCode update (Visual Studio Code 1.115)

Visuals

No response

Logs

Start with the terminal process command and attached log, using the reported combination of Visual Studio Code 1.115.0, PowerShell 7.6.0, and extension 2025.5.0. Reproduce the failure after the VS Code update and identify why pwsh exits with code 1; done means the PowerShell extension starts normally in that environment.