But they have competing products through AWS.

I imagine it works well for the whole business that they allow product teams to use the best cloud tools for the job rather than requiring them to use AWS for everything. If AWS is forced to compete even for Amazon.com's custom, that should make the whole company more resilient to long term technical stagnation.

AWS Route53 and Cloudfront are direct competitors to Fastly.

That's how good Fastly is. Outside of this issue it's a great service.