This error occurs because the log folder path declared by the updater does not exist.
The log folder provided by the Veeam Backup for Microsoft 365 updater in the msiexec command directs it to write logs to the path: C:\ProgramData\Veeam\Backup365\Logs\Setup\
That 'Setup' folder is missing in Veeam Backup for Microsoft 365 deployments from AWS/Azure Marketplace, which causes the update to fail.
Update script example:
msiexec /p "C:\ProgramData\Veeam\VeeamUpdates\VBO365\188.8.131.5204\VeeamBackupMicrosoft365_184.108.40.20604_P20230512.msp" /qf /l*v "C:\ProgramData\Veeam\Backup365\Logs\Setup\VeeamBackupMicrosoft365_220.127.116.1104_P20230512_Patch_2023_08_22_13_11_28.log" || goto exit