Posting the findings from the Product team to help community members that might stumble on this issue.
The DU Agent supports multi-step updates, where each step can be considered a mini-update for a specific part of the device. Think of it like this:
Step 1: Update the bootloader
Step 2: Update the OS image
Step 3: Perform additional tasks
Each step may require a reboot to occur immediately before moving on to the next step. However, in some update scenario, some step may require a reboot that doesn't need to happen immediately after that step is completed. In this case, deferring the reboot (XYZ_reboot_required) means postponing the reboot process until the very last step is successfully completed.
To address this use case, a work around can be to add a step that waits till night to complete so that the reboot gets triggered after it is done.