Unable to authenticate to OpenSSH server using AD username and password

Please answer the following

"OpenSSH for Windows" version
((Get-Item (Get-Command sshd).Source).VersionInfo.FileVersion)
8.1.0.1

Server OperatingSystem
((Get-ItemProperty "HKLM:\SOFTWARE\Microsoft\Windows nt\CurrentVersion\" -Name ProductName).ProductName)
Windows 10 Enterprise

Client OperatingSystem
Running OpenSSH client from the same server.

What is failing
I cannot authenticate by username and password.
This is an AAD account and I'm aware that issue #1787 exists.
I tried the workaround suggested in the issue, but it still doesn't work.
Key authentication does not work but that's expected per issue #1787.

Initially I thought this could be caused by an incorrect password due to error 1326. I went as far as changing my account password to make sure. I am positive at this point that I'm using the correct password.

Expected output
Username/password authentication should work.

Actual output

OpenSSH client output

PS C:\Users\user> ssh -vvv azuread\user@microsoft.com@localhost
OpenSSH_for_Windows_8.1p1, LibreSSL 3.0.2
debug3: Failed to open file:C:/Users/user/.ssh/config error:2
debug3: Failed to open file:C:/ProgramData/ssh/ssh_config error:2
debug2: resolving "localhost" port 22
debug2: ssh_connect_direct
debug1: Connecting to localhost [::1] port 22.
debug1: Connection established.
debug3: Failed to open file:C:/Users/user/.ssh/id_rsa error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_rsa.pub error:2
debug1: identity file C:\Users\user/.ssh/id_rsa type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_rsa-cert error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_rsa-cert.pub error:2
debug1: identity file C:\Users\user/.ssh/id_rsa-cert type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_dsa error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_dsa.pub error:2
debug1: identity file C:\Users\user/.ssh/id_dsa type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_dsa-cert error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_dsa-cert.pub error:2
debug1: identity file C:\Users\user/.ssh/id_dsa-cert type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_ecdsa error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_ecdsa.pub error:2
debug1: identity file C:\Users\user/.ssh/id_ecdsa type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_ecdsa-cert error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_ecdsa-cert.pub error:2
debug1: identity file C:\Users\user/.ssh/id_ecdsa-cert type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_ed25519 error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_ed25519.pub error:2
debug1: identity file C:\Users\user/.ssh/id_ed25519 type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_ed25519-cert error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_ed25519-cert.pub error:2
debug1: identity file C:\Users\user/.ssh/id_ed25519-cert type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_xmss error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_xmss.pub error:2
debug1: identity file C:\Users\user/.ssh/id_xmss type -1
debug3: Failed to open file:C:/Users/user/.ssh/id_xmss-cert error:2
debug3: Failed to open file:C:/Users/user/.ssh/id_xmss-cert.pub error:2
debug1: identity file C:\Users\user/.ssh/id_xmss-cert type -1
debug1: Local version string SSH-2.0-OpenSSH_for_Windows_8.1
debug1: Remote protocol version 2.0, remote software version OpenSSH_for_Windows_8.1
debug1: match: OpenSSH_for_Windows_8.1 pat OpenSSH* compat 0x04000000
debug2: fd 3 setting O_NONBLOCK
debug1: Authenticating to localhost:22 as 'azuread\user@microsoft.com'
debug3: hostkeys_foreach: reading file "C:\Users\user/.ssh/known_hosts"
debug3: record_hostkey: found key type ECDSA in file C:\Users\user/.ssh/known_hosts:1
debug3: load_hostkeys: loaded 1 keys from localhost
debug3: Failed to open file:C:/Users/user/.ssh/known_hosts2 error:2
debug3: Failed to open file:C:/ProgramData/ssh/ssh_known_hosts error:2
debug3: Failed to open file:C:/ProgramData/ssh/ssh_known_hosts2 error:2
debug3: order_hostkeyalgs: prefer hostkeyalgs: ecdsa-sha2-nistp256-cert-v01@openssh.com,ecdsa-sha2-nistp384-cert-v01@openssh.com,ecdsa-sha2-nistp521-cert-v01@openssh.com,ecdsa-sha2-nistp256,ecdsa-sha2-nistp384,ecdsa-sha2-nistp521
debug3: send packet: type 20
debug1: SSH2_MSG_KEXINIT sent
debug3: receive packet: type 20
debug1: SSH2_MSG_KEXINIT received
debug2: local client KEXINIT proposal
debug2: KEX algorithms: curve25519-sha256,curve25519-sha256@libssh.org,ecdh-sha2-nistp256,ecdh-sha2-nistp384,ecdh-sha2-nistp521,diffie-hellman-group-exchange-sha256,diffie-hellman-group16-sha512,diffie-hellman-group18-sha512,diffie-hellman-group14-sha256,diffie-hellman-group14-sha1,ext-info-c
debug2: host key algorithms: ecdsa-sha2-nistp256-cert-v01@openssh.com,ecdsa-sha2-nistp384-cert-v01@openssh.com,ecdsa-sha2-nistp521-cert-v01@openssh.com,ecdsa-sha2-nistp256,ecdsa-sha2-nistp384,ecdsa-sha2-nistp521,ssh-ed25519-cert-v01@openssh.com,rsa-sha2-512-cert-v01@openssh.com,rsa-sha2-256-cert-v01@openssh.com,ssh-rsa-cert-v01@openssh.com,ssh-ed25519,rsa-sha2-512,rsa-sha2-256,ssh-rsa
debug2: ciphers ctos: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com
debug2: ciphers stoc: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com
debug2: MACs ctos: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1
debug2: MACs stoc: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1
debug2: compression ctos: none,zlib@openssh.com,zlib
debug2: compression stoc: none,zlib@openssh.com,zlib
debug2: languages ctos:
debug2: languages stoc:
debug2: first_kex_follows 0
debug2: reserved 0
debug2: peer server KEXINIT proposal
debug2: KEX algorithms: curve25519-sha256,curve25519-sha256@libssh.org,ecdh-sha2-nistp256,ecdh-sha2-nistp384,ecdh-sha2-nistp521,diffie-hellman-group-exchange-sha256,diffie-hellman-group16-sha512,diffie-hellman-group18-sha512,diffie-hellman-group14-sha256,diffie-hellman-group14-sha1
debug2: host key algorithms: rsa-sha2-512,rsa-sha2-256,ssh-rsa,ecdsa-sha2-nistp256,ssh-ed25519
debug2: ciphers ctos: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com
debug2: ciphers stoc: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com
debug2: MACs ctos: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1
debug2: MACs stoc: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1
debug2: compression ctos: none,zlib@openssh.com
debug2: compression stoc: none,zlib@openssh.com
debug2: languages ctos:
debug2: languages stoc:
debug2: first_kex_follows 0
debug2: reserved 0
debug1: kex: algorithm: curve25519-sha256
debug1: kex: host key algorithm: ecdsa-sha2-nistp256
debug1: kex: server->client cipher: chacha20-poly1305@openssh.com MAC: compression: none
debug1: kex: client->server cipher: chacha20-poly1305@openssh.com MAC: compression: none
debug3: send packet: type 30
debug1: expecting SSH2_MSG_KEX_ECDH_REPLY
debug3: receive packet: type 31
debug1: Server host key: ecdsa-sha2-nistp256 SHA256:+BvOsn/26E65+yHZepolkr/MKtmAYjbnEfotodAdSuU
debug3: hostkeys_foreach: reading file "C:\Users\user/.ssh/known_hosts"
debug3: record_hostkey: found key type ECDSA in file C:\Users\user/.ssh/known_hosts:1
debug3: load_hostkeys: loaded 1 keys from localhost
debug3: Failed to open file:C:/Users/user/.ssh/known_hosts2 error:2
debug3: Failed to open file:C:/ProgramData/ssh/ssh_known_hosts error:2
debug3: Failed to open file:C:/ProgramData/ssh/ssh_known_hosts2 error:2
debug1: Host 'localhost' is known and matches the ECDSA host key.
debug1: Found key in C:\Users\user/.ssh/known_hosts:1
debug3: send packet: type 21
debug2: set_newkeys: mode 1
debug1: rekey out after 134217728 blocks
debug1: SSH2_MSG_NEWKEYS sent
debug1: expecting SSH2_MSG_NEWKEYS
debug3: receive packet: type 21
debug1: SSH2_MSG_NEWKEYS received
debug2: set_newkeys: mode 0
debug1: rekey in after 134217728 blocks
debug3: unable to connect to pipe \\.\pipe\openssh-ssh-agent, error: 2
debug1: pubkey_prepare: ssh_get_authentication_socket: No such file or directory
debug1: Will attempt key: C:\Users\user/.ssh/id_rsa
debug1: Will attempt key: C:\Users\user/.ssh/id_dsa
debug1: Will attempt key: C:\Users\user/.ssh/id_ecdsa
debug1: Will attempt key: C:\Users\user/.ssh/id_ed25519
debug1: Will attempt key: C:\Users\user/.ssh/id_xmss
debug2: pubkey_prepare: done
debug3: send packet: type 5
debug3: receive packet: type 7
debug1: SSH2_MSG_EXT_INFO received
debug1: kex_input_ext_info: server-sig-algs=<ssh-ed25519,ssh-rsa,rsa-sha2-256,rsa-sha2-512,ssh-dss,ecdsa-sha2-nistp256,ecdsa-sha2-nistp384,ecdsa-sha2-nistp521>
debug3: receive packet: type 6
debug2: service_accept: ssh-userauth
debug1: SSH2_MSG_SERVICE_ACCEPT received
debug3: send packet: type 50
debug3: receive packet: type 51
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug3: start over, passed a different list publickey,password,keyboard-interactive
debug3: preferred publickey,keyboard-interactive,password
debug3: authmethod_lookup publickey
debug3: remaining preferred: keyboard-interactive,password
debug3: authmethod_is_enabled publickey
debug1: Next authentication method: publickey
debug1: Trying private key: C:\Users\user/.ssh/id_rsa
debug3: no such identity: C:\Users\user/.ssh/id_rsa: No such file or directory
debug1: Trying private key: C:\Users\user/.ssh/id_dsa
debug3: no such identity: C:\Users\user/.ssh/id_dsa: No such file or directory
debug1: Trying private key: C:\Users\user/.ssh/id_ecdsa
debug3: no such identity: C:\Users\user/.ssh/id_ecdsa: No such file or directory
debug1: Trying private key: C:\Users\user/.ssh/id_ed25519
debug3: no such identity: C:\Users\user/.ssh/id_ed25519: No such file or directory
debug1: Trying private key: C:\Users\user/.ssh/id_xmss
debug3: no such identity: C:\Users\user/.ssh/id_xmss: No such file or directory
debug2: we did not send a packet, disable method
debug3: authmethod_lookup keyboard-interactive
debug3: remaining preferred: password
debug3: authmethod_is_enabled keyboard-interactive
debug1: Next authentication method: keyboard-interactive
debug2: userauth_kbdint
debug3: send packet: type 50
debug2: we sent a keyboard-interactive packet, wait for reply
debug3: receive packet: type 51
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug3: userauth_kbdint: disable: no info_req_seen
debug2: we did not send a packet, disable method
debug3: authmethod_lookup password
debug3: remaining preferred:
debug3: authmethod_is_enabled password
debug1: Next authentication method: password
debug3: failed to open file:C:/dev/tty error:3
debug1: read_passphrase: can't open /dev/tty: No such file or directory
azuread\user@microsoft.com@localhost's password:
debug3: send packet: type 50
debug2: we sent a password packet, wait for reply
debug3: receive packet: type 51
debug1: Authentications that can continue: publickey,password,keyboard-interactive
Permission denied, please try again.
debug3: failed to open file:C:/dev/tty error:3
debug1: read_passphrase: can't open /dev/tty: No such file or directory
azuread\user@microsoft.com@localhost's password:
debug3: send packet: type 50
debug2: we sent a password packet, wait for reply
debug3: receive packet: type 51
debug1: Authentications that can continue: publickey,password,keyboard-interactive
Permission denied, please try again.
debug3: failed to open file:C:/dev/tty error:3
debug1: read_passphrase: can't open /dev/tty: No such file or directory
azuread\user@microsoft.com@localhost's password:
debug3: send packet: type 50
debug2: we sent a password packet, wait for reply
debug3: receive packet: type 51
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug2: we did not send a packet, disable method
debug1: No more authentication methods to try.
azuread\user@microsoft.com@localhost: Permission denied (publickey,password,keyboard-interactive).

OpenSSH Server output (ran as System using psexec /s cmd)

C:\windows\system32>sshd -ddd
debug2: load_server_config: filename PROGRAMDATA\ssh/sshd_config
debug2: load_server_config: done config len = 186
debug2: parse_server_config: config PROGRAMDATA\ssh/sshd_config len 186
debug3: PROGRAMDATA\ssh/sshd_config:37 setting PubkeyAuthentication yes
debug3: PROGRAMDATA\ssh/sshd_config:42 setting AuthorizedKeysFile .ssh/authorized_keys
debug3: PROGRAMDATA\ssh/sshd_config:83 setting Subsystem sftp sftp-server.exe
debug1: sshd version OpenSSH_for_Windows_8.1, LibreSSL 3.0.2
debug1: get_passwd: LookupAccountName() failed: 1332.
debug1: private host key #0: ssh-rsa SHA256:uc4C4A/1LzKUcoityFnM7AKEZ+E/g/9LeUDJUWBDN34
debug1: private host key #1: ecdsa-sha2-nistp256 SHA256:+BvOsn/26E65+yHZepolkr/MKtmAYjbnEfotodAdSuU
debug1: private host key #2: ssh-ed25519 SHA256:Sa49wSHhYvEGsOtBJffusj+MG2lWSB7qvk2fTwnyIf4
debug1: rexec_argv[0]='sshd'
debug1: rexec_argv[1]='-ddd'
debug2: fd 3 setting O_NONBLOCK
debug3: sock_set_v6only: set socket 3 IPV6_V6ONLY
debug1: Bind to port 22 on ::.
Server listening on :: port 22.
debug2: fd 4 setting O_NONBLOCK
debug1: Bind to port 22 on 0.0.0.0.
Server listening on 0.0.0.0 port 22.
debug3: fd 5 is not O_NONBLOCK
debug1: Server will not fork when running in debugging mode.
debug3: send_rexec_state: entering fd = 8 config len 186
debug3: ssh_msg_send: type 0
debug3: send_rexec_state: done
Connection from ::1 port 56901 on ::1 port 22
debug1: Local version string SSH-2.0-OpenSSH_for_Windows_8.1
debug1: Remote protocol version 2.0, remote software version OpenSSH_for_Windows_8.1
debug1: match: OpenSSH_for_Windows_8.1 pat OpenSSH* compat 0x04000000
debug2: fd 5 setting O_NONBLOCK
debug3: spawning "C:\windows\System32\OpenSSH\sshd" -ddd -y
debug2: Network child is on pid 42964
debug3: send_rexec_state: entering fd = 4 config len 186
debug3: ssh_msg_send: type 0
debug3: send_rexec_state: done
debug3: ssh_msg_send: type 0
debug3: ssh_msg_send: type 0
debug3: preauth child monitor started
debug3: recv_rexec_state: entering fd = 3
debug3: ssh_msg_recv entering
debug3: recv_rexec_state: done
debug2: parse_server_config: config PROGRAMDATA\ssh/sshd_config len 186
debug3: PROGRAMDATA\ssh/sshd_config:37 setting PubkeyAuthentication yes
debug3: PROGRAMDATA\ssh/sshd_config:42 setting AuthorizedKeysFile .ssh/authorized_keys
debug3: PROGRAMDATA\ssh/sshd_config:83 setting Subsystem sftp sftp-server.exe
debug1: sshd version OpenSSH_for_Windows_8.1, LibreSSL 3.0.2
debug1: get_passwd: LookupAccountName() failed: 1332.
debug3: recv_hostkeys_state: entering fd = 3
debug3: ssh_msg_recv entering
debug3: recv_hostkeys_state: done
debug3: recv_idexch_state: entering fd = 3
debug3: ssh_msg_recv entering
debug3: recv_idexch_state: done
debug2: fd 5 setting O_NONBLOCK
debug1: list_hostkey_types: rsa-sha2-512,rsa-sha2-256,ssh-rsa,ecdsa-sha2-nistp256,ssh-ed25519 [preauth]
debug3: send packet: type 20 [preauth]
debug1: SSH2_MSG_KEXINIT sent [preauth]
debug3: receive packet: type 20 [preauth]
debug1: SSH2_MSG_KEXINIT received [preauth]
debug2: local server KEXINIT proposal [preauth]
debug2: KEX algorithms: curve25519-sha256,curve25519-sha256@libssh.org,ecdh-sha2-nistp256,ecdh-sha2-nistp384,ecdh-sha2-nistp521,diffie-hellman-group-exchange-sha256,diffie-hellman-group16-sha512,diffie-hellman-group18-sha512,diffie-hellman-group14-sha256,diffie-hellman-group14-sha1 [preauth]
debug2: host key algorithms: rsa-sha2-512,rsa-sha2-256,ssh-rsa,ecdsa-sha2-nistp256,ssh-ed25519 [preauth]
debug2: ciphers ctos: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com [preauth]
debug2: ciphers stoc: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com [preauth]
debug2: MACs ctos: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1 [preauth]
debug2: MACs stoc: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1 [preauth]
debug2: compression ctos: none,zlib@openssh.com [preauth]
debug2: compression stoc: none,zlib@openssh.com [preauth]
debug2: languages ctos: [preauth]
debug2: languages stoc: [preauth]
debug2: first_kex_follows 0 [preauth]
debug2: reserved 0 [preauth]
debug2: peer client KEXINIT proposal [preauth]
debug2: KEX algorithms: curve25519-sha256,curve25519-sha256@libssh.org,ecdh-sha2-nistp256,ecdh-sha2-nistp384,ecdh-sha2-nistp521,diffie-hellman-group-exchange-sha256,diffie-hellman-group16-sha512,diffie-hellman-group18-sha512,diffie-hellman-group14-sha256,diffie-hellman-group14-sha1,ext-info-c [preauth]
debug2: host key algorithms: ecdsa-sha2-nistp256-cert-v01@openssh.com,ecdsa-sha2-nistp384-cert-v01@openssh.com,ecdsa-sha2-nistp521-cert-v01@openssh.com,ecdsa-sha2-nistp256,ecdsa-sha2-nistp384,ecdsa-sha2-nistp521,ssh-ed25519-cert-v01@openssh.com,rsa-sha2-512-cert-v01@openssh.com,rsa-sha2-256-cert-v01@openssh.com,ssh-rsa-cert-v01@openssh.com,ssh-ed25519,rsa-sha2-512,rsa-sha2-256,ssh-rsa [preauth]
debug2: ciphers ctos: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com [preauth]
debug2: ciphers stoc: chacha20-poly1305@openssh.com,aes128-ctr,aes192-ctr,aes256-ctr,aes128-gcm@openssh.com,aes256-gcm@openssh.com [preauth]
debug2: MACs ctos: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1 [preauth]
debug2: MACs stoc: umac-64-etm@openssh.com,umac-128-etm@openssh.com,hmac-sha2-256-etm@openssh.com,hmac-sha2-512-etm@openssh.com,hmac-sha1-etm@openssh.com,umac-64@openssh.com,umac-128@openssh.com,hmac-sha2-256,hmac-sha2-512,hmac-sha1 [preauth]
debug2: compression ctos: none,zlib@openssh.com,zlib [preauth]
debug2: compression stoc: none,zlib@openssh.com,zlib [preauth]
debug2: languages ctos: [preauth]
debug2: languages stoc: [preauth]
debug2: first_kex_follows 0 [preauth]
debug2: reserved 0 [preauth]
debug1: kex: algorithm: curve25519-sha256 [preauth]
debug1: kex: host key algorithm: ecdsa-sha2-nistp256 [preauth]
debug1: kex: client->server cipher: chacha20-poly1305@openssh.com MAC: compression: none [preauth]
debug1: kex: server->client cipher: chacha20-poly1305@openssh.com MAC: compression: none [preauth]
debug1: expecting SSH2_MSG_KEX_ECDH_INIT [preauth]
debug3: receive packet: type 30 [preauth]
debug3: mm_sshkey_sign entering [preauth]
debug3: mm_request_send entering: type 6 [preauth]
debug3: mm_sshkey_sign: waiting for MONITOR_ANS_SIGN [preauth]
debug3: mm_request_receive_expect entering: type 7 [preauth]
debug3: mm_request_receive entering [preauth]
debug3: mm_request_receive entering
debug3: monitor_read: checking request 6
debug3: mm_answer_sign
debug3: mm_answer_sign: KEX signature 0000020C9948EC10(101)
debug3: mm_request_send entering: type 7
debug2: monitor_read: 6 used once, disabling now
debug3: send packet: type 31 [preauth]
debug3: send packet: type 21 [preauth]
debug2: set_newkeys: mode 1 [preauth]
debug1: rekey out after 134217728 blocks [preauth]
debug1: SSH2_MSG_NEWKEYS sent [preauth]
debug1: Sending SSH2_MSG_EXT_INFO [preauth]
debug3: send packet: type 7 [preauth]
debug1: expecting SSH2_MSG_NEWKEYS [preauth]
debug3: receive packet: type 21 [preauth]
debug1: SSH2_MSG_NEWKEYS received [preauth]
debug2: set_newkeys: mode 0 [preauth]
debug1: rekey in after 134217728 blocks [preauth]
debug1: KEX done [preauth]
debug3: receive packet: type 5 [preauth]
debug3: send packet: type 6 [preauth]
debug3: receive packet: type 50 [preauth]
debug1: userauth-request for user azuread\\user@microsoft.com service ssh-connection method none [preauth]
debug1: attempt 0 failures 0 [preauth]
debug3: mm_getpwnamallow entering [preauth]
debug3: mm_request_send entering: type 8 [preauth]
debug3: mm_getpwnamallow: waiting for MONITOR_ANS_PWNAM [preauth]
debug3: mm_request_receive_expect entering: type 9 [preauth]
debug3: mm_request_receive entering [preauth]
debug3: mm_request_receive entering
debug3: monitor_read: checking request 8
debug3: mm_answer_pwnamallow
debug2: parse_server_config: config reprocess config len 186
debug3: mm_answer_pwnamallow: sending MONITOR_ANS_PWNAM: 1
debug3: mm_request_send entering: type 9
debug2: monitor_read: 8 used once, disabling now
debug2: input_userauth_request: setting up authctxt for azuread\\user@microsoft.com [preauth]
debug3: mm_inform_authserv entering [preauth]
debug3: mm_request_send entering: type 4 [preauth]
debug2: input_userauth_request: try method none [preauth]
debug3: user_specific_delay: user specific delay 0.000ms [preauth]
debug3: ensure_minimum_time_since: elapsed 0.000ms, delaying 7.979ms (requested 7.979ms) [preauth]
debug3: mm_request_receive entering
debug3: monitor_read: checking request 4
debug3: mm_answer_authserv: service=ssh-connection, style=
debug2: monitor_read: 4 used once, disabling now
debug3: userauth_finish: failure partial=0 next methods="publickey,password,keyboard-interactive" [preauth]
debug3: send packet: type 51 [preauth]
debug3: receive packet: type 50 [preauth]
debug1: userauth-request for user azuread\\user@microsoft.com service ssh-connection method keyboard-interactive [preauth]
debug1: attempt 1 failures 0 [preauth]
debug2: input_userauth_request: try method keyboard-interactive [preauth]
debug1: keyboard-interactive devs [preauth]
debug1: auth2_challenge: user=azuread\\user@microsoft.com devs= [preauth]
debug1: kbdint_alloc: devices '' [preauth]
debug2: auth2_challenge_start: devices [preauth]
debug3: user_specific_delay: user specific delay 0.000ms [preauth]
debug3: ensure_minimum_time_since: elapsed 0.000ms, delaying 7.979ms (requested 7.979ms) [preauth]
debug3: userauth_finish: failure partial=0 next methods="publickey,password,keyboard-interactive" [preauth]
debug3: send packet: type 51 [preauth]
debug3: receive packet: type 50 [preauth]
debug1: userauth-request for user azuread\\user@microsoft.com service ssh-connection method password [preauth]
debug1: attempt 2 failures 1 [preauth]
debug2: input_userauth_request: try method password [preauth]
debug3: mm_auth_password entering [preauth]
debug3: mm_request_send entering: type 12 [preauth]
debug3: mm_auth_password: waiting for MONITOR_ANS_AUTHPASSWORD [preauth]
debug3: mm_request_receive_expect entering: type 13 [preauth]
debug3: mm_request_receive entering [preauth]
debug3: mm_request_receive entering
debug3: monitor_read: checking request 12
lookup_principal_name: User principal name lookup failed for user 'domain\user' (explicit: 5, implicit: 5)debug1: Windows authentication failed for user: user domain: domain error: 1326
debug3: mm_answer_authpassword: sending result 0
debug3: mm_request_send entering: type 13
Failed password for azuread\user@microsoft.com from ::1 port 56901 ssh2
debug3: mm_auth_password: user not authenticated [preauth]
debug3: user_specific_delay: user specific delay 0.000ms [preauth]
debug3: ensure_minimum_time_since: elapsed 624.867ms, delaying 396.392ms (requested 7.979ms) [preauth]
debug3: userauth_finish: failure partial=0 next methods="publickey,password,keyboard-interactive" [preauth]
debug3: send packet: type 51 [preauth]
...
debug3: recv - from CB ERROR:10054, io:0000022BD031BB30 [preauth]
Connection reset by authenticating user azuread\\user@microsoft.com ::1 port 56901 [preauth]
debug1: do_cleanup [preauth]
debug3: mm_request_receive entering
debug1: do_cleanup
debug1: Killing privsep child 42964

Start with the issue's OpenSSH client debug output and the referenced issue #1787; no source file or test is identified in the report. Reproduce the AAD username/password failure on Windows 10 with OpenSSH_for_Windows_8.1, with the issue complete when that authentication succeeds.