Microsoft 365 E3/E5 Cloud licensing on Windows 11 Guest OS on Parallels for Mac

I just had a lot of trouble finding information on how to set up a Windows 11 Guest OS using Microsoft 365 E3 cloud licensing.
It's a bit of a process so I wanted to post this here in case anyone else runs into this use case.

Note: If it's an apple M1 chip (which is an ARM processor) currently there isn't a "real" version of windows 11 for it, only the insider preview edition
These instructions are currently (Feb 2022) only for setting it up on an intel processor. This is because currently I have no way to test the ARM version. Presumably the process is very similar, and should become identical once windows 11 is officially released for the ARM processor.

Note: We will have to install windows twice. This is because the first time parallels "simplifies" the install by making decisions that are incorrect for cloud licensing

Download windows 11 iso
Install parallels
Install windows 11 in parallels using the normal way (probably File > New then double click Setup From ISO if you're stuck)
Shut the machine down
Go to settings > hardware > network > advanced and change the adapter to Intel Pro/1000
Boot back into windows 11
Hold shift while clicking Restart
On the next screen choose Use Device
Choose the virtual dvd drive
Continue with the install as normal until it asks for a product key
Choose "I don't have a license key" (we will do a cloud activation later in the setup)
Install Windows 11 Pro
(if you get stuck at the "connect to internet" step, double check that you've changed the network adapter type to Intel Pro/1000)
Continue with the setup until you get to Choose Account Type
Choose Work or School account
Login with your Microsoft 365 account
Finish setup
Under Start > Activation verify that it says a Windows 11 Enterprise license is active

 

"Real" Version of Windows 11 pro/enterprise arm edition is available for vlsc customers,..