Hello Lily Hill
Thank you for posting your question in Microsoft Q&A.
Please note that our forum is a public platform, and we will modify your question to hide your personal information in the description. Kindly ensure that you hide any personal or organizational information the next time you post an error or other details to protect personal data.
We understand you're planning to migrate user mailboxes from an on-premises environment to the cloud. Based on our research, Cutover Migration is typically suited for scenarios where no users exist in Microsoft 365 yet. It attempts to create mailboxes in Microsoft 365 and, when it finds a matching primary SMTP address, it tries to provision a mailbox for that existing user.
However, since you've already created cloud-only user accounts and assigned services like OneDrive and SharePoint, this approach may lead to issues such as:
Mailbox creation conflicts: It created new mail-enabled users or mailboxes because it couldn't properly match and "mailbox-enable" the existing cloud user object.
Proxy address conflicts: Issues like "MigrationProvisioningPermanentException: The proxy address is already being used..." indicate that the migration is attempting to create a new mailbox using a primary email address that is already assigned to an existing cloud-only user. This conflict prevents successful mailbox provisioning.
Could you try to change to Hybrid Migration (using Azure AD Connect for directory sync + Exchange Remote Mailbox Moves), this is the suitable method for scenarios like yours: pre-existing M365 users, on-prem Exchange, and the need for seamless merging without data loss or downtime. It:
Maps accounts properly: Syncs your on-prem AD users to match existing M365 objects via "soft matching" (UPN/proxy addresses) or "hard matching" (ExchangeGUID).
Merges data: Moves the mailbox content from on-prem into the existing M365 user's Exchange Online (EXO) mailbox, preserving the user's identity, licenses, OneDrive, SharePoint permissions, and Teams setup.
Incremental sync: Initial full sync + deltas every 24 hours (up to 90 days), minimizing staleness, far better than AzCopy's one-time bulk transfer.
Supports up to unlimited mailboxes (unlike cutover's 2,000 limit) and works with your setup.
You can refer via: Use Minimal Hybrid to quickly migrate Exchange mailboxes to Microsoft 365 or Office 365 | Microsoft…
Please understand that our initial reply may not always immediately resolve the issue. However, with your help and more detailed information, we can work together to find a solution.
If the answer is helpful, please click "Accept Answer" and kindly upvote it. If you have extra questions about this answer, please click "Comment".
Note: Please follow the steps in our documentation to enable e-mail notifications if you want to receive the related email notification for this thread.