
Explanation:
Box1: Private IP Address only
Box2: Private IP Address only
The virtual machines are registered (added) to the private zone as A records pointing to their private IP addresses.
Since both VM1 & VM2 are in same Vnet1 and the Vnet1 is liked under adatum.com domain (Private DNS Zone->Setting->virtual network links).
Reference:
https://docs.microsoft.com/en-us/azure/dns/private-dns-overview
https://docs.microsoft.com/en-us/azure/dns/private-dns-scenarios