If users in Azure active directory were synced from on-premises AD, then the on-premises password policy gets applied to users. You can add this restriction to on-premises password policy.
If all users were created directly in cloud, then the cloud password policy gets applied to users.
For now, we do not have a Azure AD password policy restriction that will not allow users to use previous passwords.
You can also refer below article to get more information on what restrictions are included in Azure AD password policy,
https://learn.microsoft.com/en-us/azure/active-directory/authentication/concept-sspr-policy#password-policies-that-only-apply-to-cloud-user-accounts
You can provide your feedback in Azure feedback portal by accessing below link. These feedbacks are directly monitored by our PM's.
https://feedback.azure.com/d365community/forum/22920db1-ad25-ec11-b6e6-000d3a4f0789
Hope this answers your question.
Please "Accept the answer" if the information helped you. This will help us and others in the community as well.