Yes - it is.
As per https://learn.microsoft.com/en-us/azure/key-vault/keys/about-keys
Effectively, Azure Key vault offers FIPS 140-2 level 1. If you are looking for a higher level of protection, use HSM.
There are two distinct HSM platforms available: 1, which protects key versions with FIPS 140-2 Level 2, and 2, which protects keys with FIPS 140-2 Level 3 HSMs depending on when the key was created.
Managed HSM uses FIPS 140-2 Level 3 validated HSM modules to protect your keys. Each HSM pool is an isolated single-tenant instance with its own security domain providing complete cryptographic isolation from all other HSMs sharing the same hardware infrastructure. Managed HSM keys are protected in single-tenant HSM-pools. You can import an RSA, EC, and symmetric key, in soft form or by exporting from a supported HSM device. You can also generate keys in HSM pools. When you import HSM keys using the method described in the BYOK (bring your own key) specification, it enables secure transportation key material into Managed HSM pools.
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hth
Marcin