How to Make It
Preheat a 6.3-quart air fryer to 350°F for 10 minutes. Separate biscuits. Using a (1-inch) round cookie cutter or base end of a pastry tip, cut out a hole in center of each biscuit. Separate donuts and donut holes. Dip donuts and donut holes in melted butter. Working in 2 batches for donuts and 1 batch for donut holes, place in air-fryer basket, and cook until golden and puffed, 2 to 2 1/2 minutes per side for donut holes, and 2 1/2 to 4 minutes per side for donuts.
Whisk together milk, 2 cups of the powdered sugar, and 1/2 teaspoon of the vanilla in a medium bowl until smooth. Set powdered sugar glaze aside. Using a clean whisk, whisk together cream cheese, and remaining 1 cup powdered sugar and 1/2 teaspoon vanilla in a small bowl until fluffy.
Dip all warm donut holes and half of warm (but not hot) donuts into powdered sugar glaze until evenly coated, and place on a wire rack set inside a baking sheet. Let stand until excess glaze has dripped off and glaze on donuts is set, about 5 minutes. Dip top halves of remaining donuts in cream cheese frosting, and place on a platter. Sprinkle donuts, as desired.