Prepare v1.25.3 release and changelog (#8438)

---------

Co-authored-by: copilot-swe-agent[bot] <198982749+Copilot@users.noreply.github.com>
Co-authored-by: JeffreyCA <9157833+JeffreyCA@users.noreply.github.com>

Author: Copilot

cli/azd/CHANGELOG.md

@@ -1,15 +1,18 @@
 # Release History
 
-## 1.26.0-beta.1 (Unreleased)
-
-### Features Added
-
-### Breaking Changes
+## 1.25.3 (2026-05-28)
 
 ### Bugs Fixed
 
+- [[#8316]](https://github.com/Azure/azure-dev/pull/8316) Fix extension pack support gaps: extension manifests can declare `dependencies` without top-level `capabilities`, semver dependency ranges resolve to the highest compatible published version, and install-time dependency cycles fail with a clear error.
+- [[#8402]](https://github.com/Azure/azure-dev/pull/8402) Fix the progress widget printing stale, overlapping output on narrow terminals by truncating each rendered line to the terminal width.
+- [[#8263]](https://github.com/Azure/azure-dev/pull/8263) Fix lifecycle hook output (`preprovision`, `postprovision`, and `predeploy`) being silently suppressed during `azd up`.
+
 ### Other Changes
 
+- [[#8440]](https://github.com/Azure/azure-dev/pull/8440) Promote the `azd tool` command group out of alpha, making it available by default along with its first-run welcome and update-check experiences.
+- [[#8316]](https://github.com/Azure/azure-dev/pull/8316) Improve `azd extension upgrade` dependency handling by reconciling declared dependencies to the latest compatible versions, adding `--no-dependency-upgrades` to opt out, and reporting dependency updates via `dependencyUpgrades` in `--output json`.
+
 ## 1.25.2 (2026-05-22)
 
 ### Bugs Fixed

cli/azd/pkg/azdext/version.go

@@ -6,4 +6,4 @@ package azdext
 // Version is the semantic version of the azdext SDK package.
 // This value mirrors the CLI version in cli/version.txt and is
 // automatically updated by eng/scripts/Update-CliVersion.ps1.
-const Version = "1.26.0-beta.1"
+const Version = "1.25.3"

cli/version.txt

@@ -1 +1 @@
-1.26.0-beta.1
+1.25.3