Which outlook mode are you using? Have you tried turning off Cached Exchange Mode to verify the result again?
- Click File > Account Settings > Account Settings.
- Click the Office 365 account, and then click Change.
- Under Offline Settings, uncheck Use Cached Exchange Mode.
- Exit, and then restart Outlook.
And could you please tell more details about your issue: outlook folders are not getting updated? Do you mean there's a delay or even if you update the folder manually still not work?
If OWA can work properly, that means there is no issue with the account.
You may also try the solution below to see if any help:
- Open Outlook and go to File- Options- Advanced- Send/Receive
- Than Create a new send / receive group in Outlook or click All Accounts group, then click Copy
- Type the new group name under Send/Receive Group Name, then click OK
- Enable both of this options:
Include this group in send/receive.
Schedule an automatic send/receive every X (you can choose time according to you) minutes.
- than restart Outlook
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