
I've reproduced this with Atom 1.0.3-0fe4183, but not consistently. I think this can happen in any view with package cards though - not just the Updates panel.
/cc @benogle
Seeing same issue on Windows 7, Atom v1.0.3.
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I've been annoyed by this small bug for a long time too, decided to try to look into it. Opened up the inspector view (View > Developer > Toggle Developer Tools) to inspect one of the failing avatars. Weird thing was, inspector thought the image was just fine - it showed a popup preview when I hovered over the image src (file:///Users/josh/Library/Application%20Support/Atom/Cache/settings-view/tststs-1445582599869). Went to view that image directly on the filesystem and it was hunky-dory. Reloaded the Updates panel to watch a network inspector load and what do you know - all of the images loaded.
Hoping maybe the repro steps will help someone that is familiar with the code base because now it's working for me and I can't reproduce ¯_(ツ)_/¯
Confirmed this is still happening in Atom 1.5.3 -

I think the problem is a wrong mime type. I can see two image request in my dev tools. The first call with type text/plain which obviously is broken.

Deleting the settings-view dir in %userprofile%\AppData\Roaming\Atom\Cache and reloading the window seems to regenerate the icon cache.
Deleting the folder @senoadiw mentioned did fix it for me briefly, but the issue came back pretty quickly.
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Atom 1.6.2
Mac OS X - 10.10.5 - Yosemite
I am having this problem as well.
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Atom 1.6.2
Mac OS X - 10.11.4 - El Capitan
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+1 on atom 1.7.4 - RHEL 7 behind proxy
The same. Also through proxy.
+1 atom 1.7.4 Ubuntu 16.04 but no proxy.
+1 Atom 1.8 OSX El Capitan
+1 Ubuntu Atom 1.7.4 no proxy
+1 Atom 1.8 OSX El Capitan
+1 Atom 1.9 on Windows 10 behind a proxy
Random note while I was looking into this. I tried inspecting using the developer tools and I set the width of the img element to 20 and it seemed to fix itself. Dont know if this is just a side effect of the browser reloading the image after it becomes available though.
I think I found what the issue is.
When the images are requested, it might happen that they time out, but a file still gets saved, which is not an image and therefore causes broken avatar images.
@bastilian I think that's a different issue (#327). The issue here is that _all_ avatars are showing as broken on the Available Updates page while they work fine on others, such as the Install pane.
+1 Atom 1.9.6, OSX - El Capitan (10.11.6)
I'm not convinced this is a different underlying issue - it also goes direct to the cache and attempts to load files just like the other pages and they both display the broken indicator if that file is corrupt/zero bytes.
Rewritten a bunch of the avatar image caching code to better handle bad responses, errors and non-image bodies and not cache them. This should solve these issues and the ones in #327 better than the size check (it would previously cache 500 errors as an image) and is better performing.
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+1 Atom 1.8 OSX El Capitan