Microsoft said it was still working to return affected servers to service, and had observed limited recovery as users gradually reconnected.
Reports of Outlook problems peaked at 138,058 and had fallen to around 34,490 by evening, according to tracking site, Downdetector.
The company had earlier in the day pointed to a number of servers being unexpectedly unavailable for the elevated load and not an increase in traffic.
"We are aware and investigating reports of users experiencing issues with Microsoft 365 services, primarily issues with Exchange Online," a Microsoft spokesperson said.
By the evening, the number of reports of problems with Microsoft 365 had fallen to nearly 13,000 users, while there were 763 reports of users having trouble accessing Teams, according to Downdetector.
The tech giant had then said the restored servers had remained stable so far and that it was shifting traffic to alternate routes wherever possible while streamlining the process to bring the remaining impacted servers back online.
"As capacity is restored, users may experience a gradual recovery as their clients reconnect," Microsoft said in a statement.
OpenAI said it was investigating an issue with Microsoft connectors in which new connections may be broken and tools are not working as expected.
Anthropic said it had identified an issue with an upstream provider affecting its Microsoft 365 connector.
Microsoft last month reported an outage of its Azure cloud platform that impacted the tech giant's suite of productivity software, and a range of industries worldwide.
