It looks like it’s because you have the src attribute in the image element.
The src attribute is what tells the browser to load the image from the url in that field.
What lazy loading does is add the src attribute when the user scrolls down. So what you do is add the image url in the data-src attribute, which does not load the image by the browser, but is used by the lazy loading library to identify the image url and insert it into a src attribute when the user scrolls and the image is to be loaded.
In most cases you can just remove the src attribute. In your case it looks like it’s loading a placeholder image, so make sure to do this on a backup theme first in case your theme is coded in a way that the placeholder helps to form the grid.