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Same here on 3 AppleTV's. Observation: the 4th ATV I have connected with Ethernet did the update. The 3 on wi-fi I'm experiencing the same issue as you.
4k 1st gen, but it will not update to tvOS 26.5

** Fourth attempt was a charm **

I didnt do anything special just hit "update" again.
 
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Genuine question.....

To all those feverishly awaiting a new model - what exactly are we expecting it to bring to the table here?
I mean, if you have the current AppleTV is it slow? can it not do what it needs to do? what other functions will be afforded by a hardware upgrade? As a user of the current AppleTV and several previous generations too.... I never think 'this is slow' or 'it could do this or that'. So, what are we expecting from this magical new model exactly? I suspect that the answer is 'better AI Siri gubbins' and fine - but the new Siri isnt out yet so what the point just yet?

I use the last HD model (2015's A8,1080p) because when I updated to 2017 ATV-4K, it could not play my largest HEVC files properly. I even replaced that unit and had the same issues. Went back to the ATV-HD which works mostly fine if I let it buffer a bit. We're two 4K generations deep now (A12 & A15 Bionic), and I'm certain the newer A17 Pro hardware will be more than fast enough to stream my BR-Rips via Infuse. I'm not interested in getting what will soon be the longest running model ever, when it's about to be made obsolete - as you can tell I prefer longevity.

I planned on updating in 2023 (based on the average release cycle), and it's been painful waiting for these delays since then. Now the AI-fueled SSD/RAM shortages risk hurting the price or specs. It's been a tough go waiting for this thing.
 
I use the last HD model (2015's A8,1080p) because when I updated to 2017 ATV-4K, it could not play my largest HEVC files properly. I even replaced that unit and had the same issues. Went back to the ATV-HD which works mostly fine if I let it buffer a bit. We're two 4K generations deep now (A12 & A15 Bionic), and I'm certain the newer A17 Pro hardware will be more than fast enough to stream my BR-Rips via Infuse. I'm not interested in getting what will soon be the longest running model ever, when it's about to be made obsolete - as you can tell I prefer longevity.

I planned on updating in 2023 (based on the average release cycle), and it's been painful waiting for these delays since then. Now the AI-fueled SSD/RAM shortages risk hurting the price or specs. It's been a tough go waiting for this thing.
I suppose we can guess then that the current model, released way back in 2022, is still seen as capable enough and not warranting an upgrade.

It will this year I dont think theres much doubt in that but its really only going to be relevant for enhanced SIRI capabilities so maybe theres an unexpected bonus for you with a new processor.
 
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