Error while connecting to Cloud PC

Potential cause- Either the Cloud PC or the user's physical device denied PKU2U protocol requests.

Ways to fix-

Turn on PKU2U protocol requests on both the Azure Cloud PC and the user's physical device:

Create a filter for all Cloud PCs.
Create a device configuration policy using the settings catalog.
On the Configuration settings page, search for and select Network Security Allow PKU2U Authentication Requests > Allow. Screenshot with the Network Security Allow PKU2U Authentication Requests set to Allow.

Select Add all devices > Edit filter > Include filtered devices in assignment > select the filter you created for all Cloud PCs.

On the Assignments page, also select an Azure AD group containing the user or the user's physical device.

Complete the creation of the device configuration policy.

If you only manage the user's physical device through Group Policy or you don't manage the user's physical device, you (or the user) can manage this setting through the allow PKU2U authentication requests to this computer to use online identities policy.

Regards,

Rachel Gomez