Yes but no. Due to architectural differences, federation under AuthTransfer protocol is simply different compared to ActivityPub. In its own terms it is federated as individuals' data is stored in personal data servers (PDSs) connected to a relay, which currently is only the Bluesky relay, that roughly speaking connects them to other personal data servers.

You can technically operate your own personal data server apart from those operated by Bluesky, but I think it's fair to say the vast majority on there don't. It's not clear yet, apart from fully holding your own data, how useful it is to operate your own given you only have one relay to use anyway at the moment.

So even in its own terms Bluesky really isn't federated in much of a meaningful sense yet. The problems are twofold: a major part of their pitch is making federation Just Work™, keeping the underlying tech out of mind to mitigate confusion, but you can't have your cake and eat it too here. Eventually, if you're really committed to meaningful federation, you have to teach people about the value of operating their own personal data servers, at minimum, otherwise what was the point in separating it out in the architecture?

Problem is, that goes against their pitch to their audience and spoils the appeal. It's telling a good joke only to kill it by explaining to the one person that went, "I don't get it."

Secondly, they've already upfront said that relays may be cost prohibitive for many people to operate, resulting in only a few ever being spun up. If that remains the case and is true, then even if a few were spun up, that's not any more federated or distributed than the rather consolidated web we see now. How much of a difference would it make if the social web was running on AuthTransfer and the major relays were owned and run by Meta/Facebook, Twitter/X, and Google?

Congrats you have your own data in a personal data server...But are you really the one running it, or did you just opt into the PDS entryway offered by Facebook/Twitter/Google/etc. because sorry, what's that about a server?