Until now, Microsoft Authenticator app on iOS had a companion app that you can install on Apple Watch. Microsoft has now announced that Microsoft Authenticator on iOS will drop support for Apple Watch next month (Jan, 2023). This is because watchOS is becoming incompatible with Authenticator security features.
So, Microsoft recommends users to delete Authenticator from Apple Watch. It is important to note that this change only impacts Apple Watch, so you will still be able to use Authenticator on your other devices including Android devices, iOS devices and others.
From Jan 2023, you won’t be able to install or use Microsoft Authenticator on Apple Watch.