How are external users in the M365 SharePoint External Users report captured?

Block 64 retrieves external users on SharePoint via the OneDrive & SharePoint file permissions, not solely from Entra ID. If your organization allows sharing with "Anyone", which includes email domains not listed in your Entra ID, these will appear in the list of External Users. You can check the permissions in your SharePoint admin center > Policies > Sharing. Additionally, if a user from Entra ID had files shared with, but was subsequently deleted from Entra ID, they would also appear in the list of external users.