Sending, receiving, and organizing email in Outlook.com
Yes, your interpretation is correct. This error normally points to the recipient’s Microsoft 365 tenant, not your sender configuration.
The phrase “mail received as unauthenticated” does not mean your user failed to authenticate to your mail system. External mail delivered between organizations is generally received by Exchange Online as anonymous SMTP unless a specific connector or certificate is used to identify the sending organization.
The important part is:
“recipient domain configured in a hosted tenant which has no mail-enabled subscriptions”
Microsoft’s documentation states that the ATTR5 error occurs when mail is sent to a domain hosted on Microsoft 365, but the tenant does not have a valid subscription that allows it to receive email.