Office 365 is a product and service from MicroSoft, not Apple. An Office 365 subscription does include MS online storage of 1TB, but that is not “iCloud”. It is an independent service offered by Microsoft, in their Azure cloud space. It is not a replacement for iCloud, or the iCloud services offered by Apple. “iCloud” is Apple’s trademark name for their proprietary cloud space and services.
The backups you store in iCloud, and the data you sync across devices in iCloud (contacts, notes in iCloud, messages in iCloud, iCloud Photos, etc) have nothing to do with Microsoft and their Office 365 service account.
If you have more than the free 5GB of space used in iCloud, and you cancel your subscription for extra storage, you will loose data in iCLoud. Apple’s iCloud and MS Office 365 storage space are completely separate and independant cloud based storage services.