With the combination of Office 365 and Active Directory, you will have to set up an App Password to use instead of the regular password.
Alternatively, you can create an Office 365-specific user to use as a service account for sending mails.
Make sure scheduled reports are configured to send as same address as the account is permitted to send as. Office 365 will drop e-mails with other From addresses.
Furthermore, you will need to ensure that the connection uses port 587: