You may receive an error "The directory object quota limit for the Principal has been exceeded", when using a service account for Group creation (Office 365 Groups and Microsoft Teams).
This issue occurs when the service account used for group creation has created 250 directory objects in Azure Active Directory. This is a known limitation published by Microsoft and currently there is no method to increase this limit.
If you do receive this error, the following options are available
- Change to another service account for Group creation
- Change to using app permissions for Group creation