Aha! We're doing different things!
I've found how not to get the format menu: I start by tapping Edit, Markup, and I hit plus (+) to get this:

I choose "Add Text," and I get a little menu and the word "Text" in the middle of the picture:

I choose Aa, and the Text Format menu comes up:

I tap red, then I delete "Text" and type Balloon. Looks good, but I really wanted bold. So I select "Balloon" and get this:

and "Format" gets me back to the Format menu.
This is a complete history of my Markup Text experience. I never got a keyboard and format menu at the same time.
My iPadOS is 18.0, not yet 18.0.1
And wow! That took a bit of work…