Note that these settings only apply to mailboxes that are hosted in Exchange Online (Office 365 or Microsoft 365). A per-mailbox setting that overrides the tenant-wide setting.An organization-wide setting to disable (or enable) SMTP AUTH.There are two settings that can help you do this:

Therefore, we highly recommend that you disable SMTP AUTH in your Exchange Online organization, and enable it only for the accounts (that is, mailboxes) that still require it. Virtually all modern email clients that connect to Exchange Online mailboxes in Office 365 or Microsoft 365 (for example, Outlook, Outlook on the web, iOS Mail, Outlook for iOS and Android, etc.) don't use SMTP AUTH to send email messages. For more information, see Authenticate an IMAP, POP or SMTP connection using OAuth. SMTP AUTH supports modern authentication (Modern Auth) through OAuth in addition to basic authentication. The SMTP AUTH protocol is used for SMTP client email submissions, typically on TCP port 587.

Applications, reporting servers, and multifunction devices that generate and send email messages.

These protocols only allow clients to receive email messages, so they need to use authenticated SMTP to send email messages. SMTP client email submissions (also known as authenticated SMTP submissions or SMTP AUTH) are used in the following scenarios in Office 365 and Microsoft 365: Find features that are not yet there in new EAC at Other Features or use Global Search that will help you navigate across new EAC.

While most of the features have been migrated to new EAC, some have been migrated to other admin centers and remaining ones will soon be migrated to New EAC. Microsoft recommends using the new Exchange Admin Center, if not already doing so. Effective from December 2022, the classic Exchange Admin Center will be deprecated for worldwide customers.

365 smtp setting