The R47H variant of the microglial membrane receptor TREM2 is linked to increased risk of late onset Alzheimer's disease. Human induced pluripotent stem cell derived microglia (iPS-Mg) from patient iPSC lines expressing the AD-linked R47Hhet TREM2 variant, common variant (Cv) or an R47Hhom CRISPR edited line and its isogeneic control, demonstrated that R47H-expressing iPS-Mg expressed a deficit in signal transduction in response to the TREM2 endogenous ligand phosphatidylserine with reduced pSYK-pERK1/2 signalling and a reduced NLRP3 inflammasome response, (including ASC speck formation, Caspase-1 activation and IL-1beta secretion). Apoptotic cell phagocytosis and soluble TREM2 shedding were unaltered, suggesting a disjoint between these pathways and the signalling cascades downstream of TREM2 in R47H-expressing iPS-Mg, whilst metabolic deficits in glycolytic capacity and maximum respiration were reversed when R47H expressing iPS-Mg were exposed to PS+ expressing cells. These findings suggest that R47H-expressing microglia are unable to respond fully to cell damage signals such as phosphatidylserine, which may contribute to the progression of neurodegeneration in late-onset AD.