Group-based licensing currently does not support groups that contain other groups (nested groups). If you apply a license to a nested group, only the immediate first-level user members of the group have the licenses applied. Therefore, User2 will not be assigned a license.
When Azure AD assigns group licenses, any users without a specified usage location inherit the location of the directory. Therefore, User3 will be assigned a license and his usage location will be set to the location of the directory.
Reference:
https://docs.microsoft.com/en-us/azure/active-directory/users-groups-roles/licensing-groups-assign
https://docs.microsoft.com/en-us/azure/active-directory/users-groups-roles/licensing-group-advanced