Someone is typing indicator no longer appearing in chat

That's part of the measures they introduced to reduce the load on the service:

To best support our Microsoft 365 customers worldwide and accommodate new growth and demand during these unprecedented times, we're making temporary adjustments to select non-essential capabilities. We do not expect these changes to have significant impact on the end users experience but wanted to make you aware.

Examples of changes we may make include:

• how often we check for presence
• the interval in which we show when the other party is typing
• video resolution

We will provide further updates to this Message center post should the situation change.

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