For VM Backup to be able to successfully browse the guest partitions and make them available for instant item level restore, the following must be true for the VM in question:

• The partition must be NTFS/ReFS (through Instant Mount) (only for File Level) formatted
• The partition must be formatted as 'Basic' and not 'Dynamic'
• If the VM has Windows Data Deduplication role enabled, the role must also be enabled where the VM Backup machine is installed (through Instant Mount)
  Note: When performing an Instant Mount from a deduplicated volume, for example, Windows Server 2025, the target machine where the disk is mounted must also run Windows Server 2025 or later.
• The files must NOT be encrypted or compressed at guest OS (VM) level
• Check that the backup was not taken with a warning (Crash Consistent)
• Storage spaces volumes are not supported.
• Microsoft Exchange -- full list of supported versions

Note: Granular Level Restore from an Offsite Backup Server / Cloud backup locations is not supported.