Microsoft current stance on NTLM is as follow:
On Demand Migration Directory Sync does not utilize NTLM V1 as long as the operating system supports NTLM V2.
NTLM V1 can be disabled at the Operating System level via Group Policy. Detail about the NTLM V1 Deprecation can be found at "Advancing Windows security: Disabling NTLM by default - Windows IT Pro Blog" and "Upcoming changes to NTLMv1 in Windows 11, version 24H2 and Windows Server 2025 - Microsoft Support".
Once the operating system is configured to use NTLM V2 and V1 is disabled, we can confirm NTLM V2 usage via Windows Event log. Sample logging is pasted below as reference.
