By default, Azure AD Connect installs with SQL Express. More specifically, the default is a SQL Server 2012 Express LocalDB (a light version of SQL Server Express).
If you need to manage a higher volume of directory objects, you’ll definitely want to point the installation wizard to a different installation of SQL Server. The type of SQL Server installation can impact the performance of Azure AD Connect. And, if – like a lot of Microsoft customers – the fear of sync failure keeps you up at night, doing this could help you sleep a lot better.
SQL Express has a 10 GB size-limit which also means that there’s very little room to grow above 100,000 objects. If you are even near the 100,000 object limit, make plans to upgrade.
Azure AD Connect supports all versions of Microsoft SQL Server from 2008 R2 (with latest Service Pack) to SQL Server 2019. Microsoft Azure SQL Database, though, is not supported as a database.
Also, keep in mind that you can only have one sync engine per each SQL instance. You can’t use the same SQL Server instance for syncing FIM/MIM, DirSync and Azure AD Sync. Each would need its own SQL Server instance.
Check out how to Move Azure AD Connect database from SQL Server Express to SQL Server.