Hello Richelle Lanuza,
Thank you for raising your question on the Microsoft Windows Forum.
Regarding your inquiry — YES, the Deduplication feature in Windows Server dose support file compression, particularly when used with ReFS volumes. From Windows Server 2019 onward, deduplication can be combined with compression to maximize storage efficiency.
Since you're working with DFS (Distributed File System), it's reassuring to know that deduplication is fully compatible with DFS Replication. Files are replicated in their normal (rehydrated) state and then deduplicated again on the destination server. Just be cautious not to enable NTFS compression on deduplicated volumes, as this may corrupt metadata.
🔗 Learn more about Data Deduplication interoperability in Windows Server
Feel free to reach out if you need help with configuration or have further questions!