How to cancel an announced Android System update

You can not cancel the update itself because it has already been applied.

Modern Android devices have the system partition twice (called A/B partition). One that is currently active and one that can be used for installing updates "seamless" (so called by Google). Which partition is currently active on next boot can be changed.

The screen you show means that an update has been downloaded and installed on the non-active partition. The only step left is rebooting into the updated partition.

I am not sure if you do the reboot but not switch to the updated partition. No matter even if you would manage to do so I assume that the system would start to download and re-apply the update again on the other partition and then ask for rebooting into it to finish the update.

Prevent updates via Developer options

Edit: Even if it is too late for you I stumbled over a settings that might be helpful in similar situations:

On a Pixel 3a running Android 11 I saw in the Developer options and entry called Automatic system updates - Apply updates when device restarts

Therefore if you have such an option and disable it while there is already a pending update plus a scheduled reboot you can cancel the update installation.

If you decide later to install the update you can do that by manually triggering it in the Android system settings.