Hi FireRain,
The short answer is yes. We can only sync users whose local AD domain suffix has been verified in Office 365. If the local UPN suffix doesn’t match the verified domain suffix in Office 365, users will be synced to Office 365 with the *.onmicrosoft.com suffix.
For instance, abc.com is verified in Office 365. And the tenant domain in Office 365 is company.onmicrosoft.com. In the local AD, we have usera@abc.com and userb@xyz.com. When we sync both two users to Office 365, the users in Office 365 will be usera@abc.com and userb@company.onmicrosoft.com.
Best Regards,
Bruce Zhou