Go to the Email settings in the IoT Console and be sure the setup for Office 365 is as follows:
SMTP Host: smtp.office365.com
SMTP Port: 587
SMTP Secure: No
SMTP Require TLS: Yes
Troubleshooting
Please check out the following article on how to manually verify sending mail on the command line is working or not. We recommend this article as a jump off point since it eliminates any connection attempt from our side and instead solely focuses on verifying whether or not sending mail externally is working or not. Please ensure that you can successfully send in such a manner if you are getting any troubles in saving the credentials in the IoT Console.