Ory is the largest open source community in the world for cloud software application security. We maintain advanced open source security software solving authentication, authorization, access control, application network security, and delegation. Ory implements a variety of industry and best-practice standards including OAuth 2.0 / OAuth 2.1, OpenID Connect, Zero Trust Networking, Google Zanzibar Policy Framework, FIDO2 U2F, WebAuthn, TOTP, and more.

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dont think its a DNS issue, i would think you have to have given that non custom domain callback to microsoft when initiating the oauth2 flow