The error behaves slightly different on SQL 2016 if you do not have the patch. The setup experience simply crashes during install and while the components is ticked as "installed" next time you run setup, it is only "half-baked". You need to start over, this time with the hotfix ready.
Here is a screenshot of the installer crash with "AxSetup.exe has stopped working". Ignore that it is on the SSAS step, I simply chose to install both extensions at the same time. The error actually relates to Reporting Extensions.
And if you open the setup logs for further inspection, you will see it ends while trying to setup the SSRS bits. Here is an excerpt from the install log:
2017-07-05 11:30:56Z Setting the SQL Server Reporting Services service account to the Microsoft Dynamics AX .Net Business Connector account.
2017-07-05 11:30:56Z Generating database rights script.
2017-07-05 11:30:56Z Opening connection to the database using the connection string server=SERVER\INSTANCE;Integrated Security=SSPI.
2017-07-05 11:30:56Z Writing the database rights script to C:\Users\USERID\AppData\Local\Temp\3\tmpADC0.tmp.
2017-07-05 11:30:56Z Executing database rights script.
I got this error even though the installation was slipstreamed with CU12, which is a later version, compared to the hotfix.
So if you're planning on installing these bits for SQL 2016 (or SQL 2014), do yourself the favor of downloading the KB3216898 and slipstream your install by extracting it into your installation Update folder.
Here is the link, again: https://fix.lcs.dynamics.com/Issue/Resolved?kb=3216898&bugId=3800976
