Microsoft Office 365 Issue on AVD

This error message occurs because the Microsoft Office 365 license you have on the Azure Virtual Desktop machine is not designed for shared computer activation. This means that you cannot use the same license for multiple users to access the same machine at the same time.
To resolve this issue, you can try the following:
1. To use shared computer activation, you must have an Office 365 (or Microsoft 365) plan that includes Microsoft 365 Apps and that supports shared computer activation.
2. Verify that shared computer activation is enabled for Microsoft 365 Apps: https://learn.microsoft.com/en-us/deployoffice/troubleshoot-shared-computer-activation#verify-that-shared-computer-activation-is-enabled-for-microsoft-365-apps
3. If you have a volume license agreement with Microsoft, you can use the Microsoft Office Deployment Tool to deploy Office to your virtual machines and activate the software using a Key Management Service (KMS) host.
I hope this helps!