Hi Caitlin,
Yes, the bug seems to be affecting the web version (I use this) as well as the outlook app.
On my side, only ten categories are appearing. The other 370+ are missing. However, the data/categories aren't really gone. When I click on a contact, I can see all the categories associated with their record, which proves that the data has not been deleted...it's just not showing up on the left hand list.
The advice I've been given from Microsoft is "DO NOT DELETE OR MAKE ANY CHANGES TO YOUR CATEGORIES"
It won't help to delete and recreate them, because the bug is still there.
Microsoft have provided me with a workaround, but whether it's useful will depend on how many categories you have.
They are suggesting the following:
"For now, would recommend to utilize the previous contacts feature using the folder's option as shown below, this is due to the uncertain ETA on resolution for the previous feature limitation occurring:"

In other words, roll back to the old version of Outlook (web or app) before categories were introduced, and use the folders feature to re-categorise your contacts.
It's a poor compromise, but that's all they can offer at this point.
Unfortunately, this is only worth doing if you only have a small number of categories that you can quickly recreate as folders.
In our case, with nearly 380 categories and 4,000 contacts, it will take weeks to do.