Hi,
From the screenshot, you are trying to use SQL Authentication in the linked server but while creating the Azure SQL Server you have only enabled Azure Active Directory Authentication but not SQL Authentication as below.
More details about Azure Active Directory autentication: here
You can go to the Azure Portal to disable AD only authentication and make the linked service work by using System Assigned Managed Identity. In the below page, unselect the option -Support only Azure Active Directory authentication for this server, then save. After that go to linked service and try System Assigned Managed Identity for authentication and let us know how it goes.