Hi @Nuhamin Tesfaye,
Welcome to the Microsoft Q&A Platform! Thank you for asking your question here.
Firstly, we can use both ADDS and Microsoft Entra ID as Azure Virtual Desktop supports different types of identities for accessing corporate resources and applications. As a workload owner, you can select from various types of identity providers according to your business and organizational needs. Review the identity design areas in this section to assess what's best for your workload.
Azure Virtual Desktop supports hybrid identities through Microsoft Entra ID, including identities that are federated by using AD FS. You can manage these user identities in AD DS and sync them to Microsoft Entra ID by using Microsoft Entra Connect. You can also use Microsoft Entra ID to manage these identities and sync them to AD DS.
Microsoft Entra ID: Azure Virtual Desktop supports cloud-only identities when you use VMs that are joined by using Microsoft Entra ID. These users are created and managed directly in Microsoft Entra ID.
I would recommend that you refer to the link given below for more information on AVD. https://learn.microsoft.com/en-us/azure/virtual-desktop/users/
If you have any further queries, do let us know.