Hi Caroline,
Here’s what’s likely causing the issue:
Domain Connect is still active
Microsoft 365 uses a feature called Domain Connect to automatically configure DNS with GoDaddy. If this is active, Microsoft will continue syncing DNS settings with GoDaddy even if you’ve set up Azure DNS.
Domain transfer vs. DNS delegation
Transferring DNS management is not the same as transferring domain ownership. If you haven’t completed the domain registrar transfer using the EPP code, GoDaddy still owns the domain, even if DNS records point to Azure.
EPP code not requested due to setup path
If you added the domain via Microsoft 365’s admin center using Domain Connect, the system skips the registrar transfer and assumes DNS will stay with GoDaddy.
Here’s how to fully transfer your domain and DNS management to Microsoft:
Disable Domain Connect in Microsoft 365
Go to Microsoft 365 Admin Center > Settings > Domains.
Select your domain and choose Advanced settings.
Remove the Domain Connect link to GoDaddy if present.
Transfer Domain Registrar Ownership
Log in to your GoDaddy account.
Unlock the domain and retrieve the EPP code.
Use a registrar that supports domain transfers to Microsoft (e.g., via Azure App Service Domains or a Microsoft partner).
Initiate the transfer and provide the EPP code when prompted.
Update Nameservers to Azure DNS
After the transfer completes, go to your new registrar’s dashboard.
Replace the nameservers with the ones provided by your Azure DNS zone.
Verify DNS Propagation
Use tools like nslookup or https://dnschecker.org to confirm that your domain is now pointing to Azure’s nameservers.
   
Let me know how it goes, Happy to help!