I got the below error, when I tried to deploy my GAE app through gcloud.
Updating service [default]...failed.
If you really have more than the 10000 files quota in the service you're trying to deploy then you might have to reduce the number accordingly.
Other things to try:
Assuming you do not actually hit the files quota then the error usually indicates you have looping/circular referencing symlinks in your app directory. Which could also explain a path like the one you mentioned in a comment to this post: https://stackoverflow.com/a/42425048/4495081. You just have to fix the offending symlink(s). Again, a simple/consistent directory structure could help prevent such issues.