Unable to log in to Azure SQLDB using Azure AD

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We are unable to log in to our Azure SQLDB instance. We get the error Login failed for user < token-identified principal >

The weird thing is that we can connect using Power BI with the same credentials, it's just not able to do so using Azure Data Studio

The error dump is as follows

Microsoft.Data.SqlClient.SqlException (0x80131904): Login failed for user '<token-identified principal>'.
   at Microsoft.Data.SqlClient.SqlInternalConnection.OnError(SqlException exception, Boolean breakConnection, Action`1 wrapCloseInAction)
   at Microsoft.Data.SqlClient.TdsParser.ThrowExceptionAndWarning(TdsParserStateObject stateObj, Boolean callerHasConnectionLock, Boolean asyncClose)
   at Microsoft.Data.SqlClient.TdsParser.TryRun(RunBehavior runBehavior, SqlCommand cmdHandler, SqlDataReader dataStream, BulkCopySimpleResultSet bulkCopyHandler, TdsParserStateObject stateObj, Boolean& dataReady)
   at Microsoft.Data.SqlClient.TdsParser.Run(RunBehavior runBehavior, SqlCommand cmdHandler, SqlDataReader dataStream, BulkCopySimpleResultSet bulkCopyHandler, TdsParserStateObject stateObj)
   at Microsoft.Data.SqlClient.SqlInternalConnectionTds.CompleteLogin(Boolean enlistOK)
   at Microsoft.Data.SqlClient.SqlInternalConnectionTds.AttemptOneLogin(ServerInfo serverInfo, String newPassword, SecureString newSecurePassword, Boolean ignoreSniOpenTimeout, TimeoutTimer timeout, Boolean withFailover)
   at Microsoft.Data.SqlClient.SqlInternalConnectionTds.LoginNoFailover(ServerInfo serverInfo, String newPassword, SecureString newSecurePassword, Boolean redirectedUserInstance, SqlConnectionString connectionOptions, SqlCredential credential, TimeoutTimer timeout)
   at Microsoft.Data.SqlClient.SqlInternalConnectionTds.OpenLoginEnlist(TimeoutTimer timeout, SqlConnectionString connectionOptions, SqlCredential credential, String newPassword, SecureString newSecurePassword, Boolean redirectedUserInstance)
   at Microsoft.Data.SqlClient.SqlInternalConnectionTds..ctor(DbConnectionPoolIdentity identity, SqlConnectionString connectionOptions, SqlCredential credential, Object providerInfo, String newPassword, SecureString newSecurePassword, Boolean redirectedUserInstance, SqlConnectionString userConnectionOptions, SessionData reconnectSessionData, Boolean applyTransientFaultHandling, String accessToken, DbConnectionPool pool, SqlAuthenticationProviderManager sqlAuthProviderManager)
   at Microsoft.Data.SqlClient.SqlConnectionFactory.CreateConnection(DbConnectionOptions options, DbConnectionPoolKey poolKey, Object poolGroupProviderInfo, DbConnectionPool pool, DbConnection owningConnection, DbConnectionOptions userOptions)
   at Microsoft.Data.ProviderBase.DbConnectionFactory.CreateNonPooledConnection(DbConnection owningConnection, DbConnectionPoolGroup poolGroup, DbConnectionOptions userOptions)
   at Microsoft.Data.ProviderBase.DbConnectionFactory.<>c__DisplayClass40_0.<TryGetConnection>b__1(Task`1 _)
   at System.Threading.Tasks.ContinuationResultTaskFromResultTask`2.InnerInvoke()
   at System.Threading.ExecutionContext.RunInternal(ExecutionContext executionContext, ContextCallback callback, Object state)
--- End of stack trace from previous location where exception was thrown ---
   at System.Threading.Tasks.Task.ExecuteWithThreadLocal(Task& currentTaskSlot)
--- End of stack trace from previous location where exception was thrown ---
   at Microsoft.SqlTools.ServiceLayer.Connection.ReliableConnection.ReliableSqlConnection.<>c__DisplayClass30_0.<<OpenAsync>b__0>d.MoveNext() in D:\a\1\s\src\Microsoft.SqlTools.ManagedBatchParser\ReliableConnection\ReliableSqlConnection.cs:line 314
--- End of stack trace from previous location where exception was thrown ---
   at Microsoft.SqlTools.ServiceLayer.Connection.ConnectionService.TryOpenConnection(ConnectionInfo connectionInfo, ConnectParams connectionParams) in D:\a\1\s\src\Microsoft.SqlTools.ServiceLayer\Connection\ConnectionService.cs:line 549
ClientConnectionId:ecfdba7a-8635-46cd-ada7-e7ef002fc5cb
Error Number:18456,State:1,Class:14

The error number 18456 seems to imply that the user doesn't have access to the server but this doesn't make sense as they do have access

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Thanks for submitting this issue. Please also check if it is already covered by an existing one, like:

• "Login failed for user 'NT AUTHORITY\ANONYMOUS LOGON'." when trying to connect to an azure SQL instance. (#8815)
• （How can't I support a database with a lower version）怎么不支持低版本的数据库啊 (#7852)
• Only Azure Data Studio for Mac cannot connect to SQL Server in Docker (#9116)
• Azure Active Directory - Universal with MFA support results in connection error (Login failed for user 'NT AUTHORITY\ANONYMOUS LOGON'.) (AAD) (#4085)
• Error When Trying To Connect To The Dedicated Admin Connection On SQL Server (#3161)