Clarification over "dormant" account status

I was looking today at our list of "Remove dormant accounts from sensitive groups" within Microsoft Defender for Identity, and one service account has caused a bit of discussion. The account would only be used on-premise and would never be carrying out authentications out of our estate. In this case would Defender for Identity still see the account as being "dormant", or is the reason because it's not carried out any of those off-estate authentications?

Apologies if this is a simple question, but it would be very helpful to know the answer.