FWIW:
There is a new and ongoing issue with IMAP (and Exchange) access to Outlook and Hotmail accounts which falsely presents symptoms of bad passwords or server configuration. I've been chasing this for 4 days (and managed to get a Microsoft ticket created but seemingly to no avail although it was finally acknowledge: https://support.microsoft.com/en-us/office/outlook-and-other-apps-are-unable-to-connect-to-outlook-com-f4202ebf-89c6-4a8a-bec3-3d60cf7deaef). Here are details:
Starting morning of Jan 24 2024: Frequent intermittent authentication failures for all IMAP and Exchange Outlook(5) and Hotmail(1) email accounts in MS Office Pro 2021 Outlook on 2 Windows 10 Pro laptops and in email clients Fair Email and K9 Mail on 2 Android devices. All devices had been working fine for quite some time and experienced no recent changes or updates, and the problem persists after the application of latest updates.
- At each send-receive the issue occurs variably to one, some, or all of the accounts being processed. Email server reports "AUTHENTICATE failed".
- In Outlook 2021 after known good credentials fail, then at erroneous prompt to re-enter credentials, clicking OK to use the same credentials will eventually get successful login, but the number of repeated attempts required is variable. Likewise in other clients although the method of queuing many send-recieve requests may vary.
- Issue occurs to different accounts at each send-receive, and each time it takes variable # of attempts before existing and unchanged credentials are accepted.
- Occurs with both variations of Outlook IMAP server parameters (outlook.office365.com/smtp-mail.outlook.com and imap.outlook.com/smtp.outlook.com) which both worked before this issue started. My default is outlook.office365.com/smtp-mail.outlook.com.
- Rapidly re-sending the credentials for an individual account is more effective than trying again later. In fact, in Outlook 2021 on PC once the process of re-sending the credentials a few times for each account gains access, then if there are continuous requests for send and receive (click send-receive many times to fill the queue and keep it running) they will all go through but as soon as there is a gap in the activity then the next send- receive may again erroneously fail to authenticate until the credentials are pushed through again. Lather rinse repeat.
- Occurs when when same account is configured as Exchange (automatically or manually) with slightly different UI experience.
- Occurs when configuring new accounts, which may or may not fail at first but then eventually get through.
- Occurs through different internet connections: Wifi, direct mobile data, hotspot to mobile data.
- Occurs with or without Antivirus, and with or without VPN.
- Concurrent log-ins not a factor (tested only one device at a time).
- Does not occur in any other email service provider accounts.
- None of this occurred before morning. of Jan 24.
- In the Outlook Android app, Outlook and Hotmail email accounts are configured automatically with no option to configure manually or to review settings (which are offered for non-Outlook/Hotmail accounts) and the same accounts do not have the same problem in the Android Outlook app. This is the only client that seems unaffected but I suspect it is just obscuring the errors. So Android Outlook may be a workaround but is not viable for troubleshooting.
Of course there is disappointment in the failing of the service, but even worse is Microsoft's slow response and poor communication about it, which in turn compounds the problem exponentially. Even in this thread which is linked from Microsoft's official acknowledgment of the issue, 4-5 days after the issue emerged and 2 days after it was officially acknowledged people are still being encouraged to change passwords, server settings or profiles at the worst possible time to do such things. To be clear, this is not to fault the helpers in these threads who are following best practices for the presented symptoms but rather faulting Microsoft for allowing that to occur even after they are aware of the issue. Thanks to those who took time to reported it.