Update as of Feb 22, 2018 - The below issue has now been fixed. Applying packages will no longer fail during the preperation phase when trying to download the package on the BI machine.
A recent change is causing package deployments to fail during the preparation phase when trying to download a package on the BI machine associated with sandbox environments deployed in Microsoft subscriptions. When this error is encountered, the environment state in LCS displays Preparation failed. This issue is currently impacting some, but not all, Tier 2, Tier 3, Tier 4 and Tier 5 sandbox environments. The error is impacting deployments of all package types when applying updates in LCS.
If the error occurs, the following appears in the log files in the BI folder that can be downloaded from LCS:
[2018-02-19 21:55:07] Downloading servicingtools.zip with download link https://test.blob.core.windows.net/servicingpackages/AX/7/servicingtools/1.0.30/servicingtools.zip?sv=2015-04-05&sr=b&sig=W5b0G85Qp8Q7Y1sxJbhqkkBwWa1v%2Bx1%2B9aSd5k0WeQE%3D&se=2018-02-20T21%3A54%3A53Z&sp=r to Server XYZ
[2018-02-19 21:55:07] Failed to download servicingtools.zip to Server 'XYZ'
[2018-02-19 21:55:07] Sleeping for 30 seconds before retrying
We are actively investigating this issue and will update this blog post as soon as we have released a fix.