Windows Local Administrator Password Solution (LAPS) is the Microsoft technology used to manage and back up the password of a single local administrator account on domain-joined devices. To configure this for Intune-managed devices, you must create an Account protection policy. Within this policy, the Local admin password solution (Windows LAPS) profile contains the necessary settings. The core requirement of the question is fulfilled by setting the Backup Directory to Microsoft Entra ID, which ensures the password is saved to the cloud directory and not an on-premises Active Directory.

1. Microsoft Learn | Intune policy for Windows LAPS: This document provides the official procedure for creating a LAPS policy in Microsoft Intune. It explicitly details the steps outlined in the correct answer, including navigating to "Endpoint security," selecting the "Local admin password solution (Windows LAPS)" profile, and configuring the "Backup Directory."

URL: https://learn.microsoft.com/en-us/mem/intune/protect/windows-laps-configure#createa-laps-policy

2. Microsoft Learn | Windows LAPS Overview: This document explains the fundamental concepts of Windows LAPS, including its support for Microsoft Entra ID as a password backup directory.

URL: https://learn.microsoft.com/en-us/windows-server/identity/laps/laps-overview#wherecan-i-back-up-the-passwords