Hi,
Thanks for the information,
Please kindly check if the address match in AD since the error message prompt the object cannot be found.
Also, you could try another way to run the command as below.
$user = "username@domain.com" # Replace with the user's UPN or DistinguishedName
$newAlias = "smtp:alias@domain.com" # Replace with the new alias
$userDetails = Get-ADUser -Identity $user -Properties proxyAddresses # Retrieve the current proxyAddresses
$currentProxyAddresses = $userDetails.proxyAddresses # Add the new alias to the existing proxyAddresses array
$currentProxyAddresses += $newAlias
Set-ADUser -Identity $user -Replace @{proxyAddresses=$currentProxyAddresses} # Update the user with the new proxyAddresses
Then, you could make a sync to Azure AD after change.
Hope it helps.