Let's keep the terms clear here:

"hot add" raises the high water mark of available memory and will
increase the total memory seen by the Linux VM. Because there's no "hot
remove" (yet) free -m will increase with "hot add" but never decrease.

"balloon" will take memory and allocate it to buffers controlled by the
hyper-v driver, which will then release that memory back to the host.
This is "ballooning down". If the hyper-v driver cannot grab memory and
put it aside, for whatever reason, it can not release it to the host.

The balloon code can also ask the host for memory and release it back to
the OS if demand increases again.

>From the host side, we are observing the numbers Nick is reporting. From
the VM side, you won't be able to see it go down. The assigned memory
should decrease, and what we usually see is that it gradually goes down
to the minimum level.

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https://bugs.launchpad.net/bugs/1294283

Title:
  Memory balloning in Hyper-V generation 2 does not work

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