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According to the API docs URL you need to query for photo looks like this:
GET https://outlook.office.com/api/v2.0/Users('{user_id}')/photo/$value
You need to change your URL in the v-img
element:
<v-avatar size="128" absolute color="secondary">
<v-img:src="`https://outlook.office.com/api/v2.0/Users(${email})/photo/$value`" />
</v-avatar>
Source:stackexchange.com